MCom I Semester Perception Individual Decision Making Study Material Notes
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MCom I Semester Perception Individual Decision Making Study Material Notes: what is perception factors influencing perception person perception making judgments about others attribution theory Frequently used shortcuts in judging others Specific applications in organizations employment interview how should the decision be made improving creativity in decision making :
BBA I Semester Managerial Economics Inflation Study Material Notes
What Is Perception?
Perception is a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. However, what one perceives can be substantially different from objective reality. There need not be, but there is often disagreement. For example, it’s possible that all employees in a firm may view it as a great place to work–favorable working conditions, interesting job assignments, good pay, excellent benefits, an understanding and responsible management-but, as most of us know, it’s very unusual to find such agreement.
Why is perception important in the study of OB? Simply because people’s behavior is based on their perception of what reality is not on reality itself. The world as it is perceived is the world that is behaviorally important.
Perception Individual Decision Making
Factors Influencing Perception
How do we explain that individuals may look at the same thing, yet perceive it differently? A number of factors operate to shape and sometimes distort perception. These factors can reside in the perceiver, in the object or target being perceived, or in the context of the situation in which the per ception is made (see Exhibit 5-1).
When an individual looks at a target and attempts to interpret what he or she sees, that in pretation is heavily influenced by the personal characteristics of the individual perceiver. Per sonal characteristics that affect perception include a person’s attitudes, personality, motive interests, past experiences, and expectations. For instance, if you expect police officers to DC authoritative, young people to be lazy, or individuals holding public office to be unscrupulous, you may perceive them as such regardless of their actual traits.
Characteristics of the target being observed can affect what is perceived. Loud people more likely to be noticed in a group than quiet ones. So, too, are extremely attractive or unattractive individuals. Because targets are not looked at in isolation, the relationship of a target to its background also influences perception, as does our tendency to group close things and similar things together. For instance, women, people of color, or members of any other group that has clearly distinguishable characteristics in terms of features or color are often perceived as alike in other, unrelated characteristics as well.
Perception Individual Decision Making
The context in which we see objects or events is also important. The time at which an object or event is seen can influence attention, as can location, light, heat, or any number of situational factors. I may not notice a 22-year-old female in an evening gown and heavy make-up at a nightclub on Saturday night. Yet that same woman so attired for my Monday morning management class would certainly catch my attention (and that of the rest of the class). Neither the perceiver nor the target changed between Saturday night and Monday morning, but the situation is different.
Perception Individual Decision Making
Person Perception: Making Judgments About Others
Now we turn to the most relevant application of perception concepts to OB. This is the issue of person perception.
Perception Individual Decision Making
Attribution Theory
Our perceptions of people differ from our machines, or buildings because we make inference about inanimate objects. Nonliving objects are sales or intentions. People do. The result is that when we observe people explanations of why they behave in certain therefore, will be significantly influenced by the assur state.
of people differ from our perceptions of inanimate objects such as desks. dines because we make inferences about the actions of people that we don’t make acts Nonliving objects are subject to the laws of nature, but they have no beliefs. do. The result is that when we observe people, we attempt to develop they behave in certain ways. Our perception and judgment of a person’s actions. t icantly influenced by the assumptions we make about that person’s internal
Attribution theory has been proposed to develop explanations of the ways in which we judge people differently, depending on what meaning we attribute to a given behavior. Basically, the theory suggests that when we observe an individual’s behavior, we attempt to determine whether it was internally or externally caused. That determination, however, depends largely on three factors distinctiveness, (2) consensus, and (3) consistency. First, let’s clarify the differences between internal and external causation and then we’ll elaborate on each of the three determining factors.
Internally caused behaviors are those that are believed to be under the personal control of the individual. Externally caused behavior is seen as resulting from outside causes: that is, the person is seen as having been forced into the behavior by the situation. If one of your employees is late for work, you might attribute his lateness to his partying into the wee hours of the morning and then oversleeping. This would be an internal attribution. But if you attribute his arriving late to an automobile accident that tied up traffic on the road that this employee regularly uses, then you would be making an external attribution.
Distinctiveness refers to whether an individual display different behaviors in different situations. I the employee who arrives late today also the source of complaints by coworkers for being a “goofoff”? What we want to know is whether this behavior is unusual. If it is, the observer is likely to give the behavior an external attribution. If this action is not unusual, it will probably be judged, as internal.
If everyone who is faced with a similar situation responds in the same way, we can say the behavior shows consensus. The behavior of the employee discussed above would meet this criterion if all employees who took the same route to work were also late. From an attribution perspective, if consensus is high, you would be expected to give an external attribution to the employee’s tardiness, whereas if other employees who took the same route made it to work on time, your conclusion as to causation would be internal.
Finally, an observer looks for consistency in a person’s actions. Does the person respond the same way over timer Coming in 10 minutes late for work is not perceived in the same way for the employee for whom it is an unusual case (she hasn’t been late for several months) as it is for the employee for whom it is part of a routine pattern (she is late two or three times a week). The more consistent the behavior, the more the observer is inclined to attribute it to internal causes.
Perception Individual Decision Making
Exhibit 5-2 summarizes the key elements in attribution theory. It would tell us, for instance, that if your employee-Kim Rai-generally performs at about the same level on other related tasks as she does on her current task (low distinctiveness), if other employees frequently perform different better or worse than Kim does on that current task (low consensus), and if Kim’s performance on this current task is consistent over time (high consistency), you or anyone else who is luduino Kim work is likely to hold her primarily responsible for her task performance (internal attribution)
One of the more interesting findings from attribution theory is that there are errors or blases distort attributions. For instance, there is substantial evidence that when we make judgments the behavior of other people, we have a tendency to underestimate the influence of external factors and overestimate the influence of internal or personal factors. This is called the fundamental attri bution error and can explain why a sales manager is prone to attribute the poor performance of her sales agents to laziness rather than to the innovative product line introduced by a competitor. There is also a tendency for individuals to attribute their own successes to internal factors such as ability of chort while putting the blame for failure on external factors such as bad luck or unproductive coworkers. This is called the self-serving bias.
Are these errors or biases that distort attributions universal across different cultures? The evidence is mixed, but most of it suggests that there are cultural differences. For instance, a study of Korean managers found that contrary to the self-serving bias, they tended to accept responsibility for group failure “because I was not a capable leader” instead of attributing it to group members. Attribution theory was developed largely based on experiments with Americans and Western Euro peans. But the Korean study suggests caution in making attribution theory predictions in non-Western societies, especially in countries with strong collectivist traditions.
Perception Individual Decision Making
Frequently Used Shortcuts in Judging Others
We use a number of shortcuts when we judge others. Perceiving and interpreting what others do is burdensome. As a result, individuals develop techniques for making the task more manageable. These techniques are frequently valuable–they allow us to make accurate perceptions rapidly and provide valid data for making predictions. However, they are not foolproof. They can and do get us into trouble. An understanding of these shortcuts can be helpful in recognizing when they can result in significant distortions.
Selective Perception Any characteristic that makes a person, object, or event stand out will increase the probability that it will be perceived. Why? Because it is impossible for us to assimilate everything we see-only certain stimuli can be taken in. This tendency explains why, as we noted earlier, you are more likely to notice cars like your own or why some people may be reprimanded by their boss for doing something that, when done by another employee, goes unnoticed. Because we can’t observe everything going on about us, we engage in selective perception. A classic example shows how vested interests can significantly influence which problems we see.
Dearborn and Simon performed a perceptual study in which 23 business executives read a comprehensive case describing the organization and activities of a steel company of the 23 executives. 6 were in sales, 5 in production, 4 in accounting, and 8 in miscellaneous functions. Each manager was asked to write down the most important problem he found in the case. Eighty-three percent of the sales executives rated sales important; only 29 percent of the others did so. This, along with other results of the study, led the researchers to conclude that the participants perceived aspects of a situation that were specifically related to the activities and goals of the unit to which they were attached. A group’s perception of organizational activities is selectively altered to align with the they represent. In other words, when the stimuli are ambiguous, as in the steel coveted interests they represent. In other words :
Halo Effect When we draw a general impression about an individual on the basis of a single act eristic, such as intelligence, sociability, or appearance, a halo effect is operating. Thish non frequently occurs when students appraise their classroom instructor Students may a nence to a single trait such as enthusiasm and allow their entire evaluation to be tainted by judge the instructor on that one trait. Thus, an instructor may be quiet, assured, knowledgeable highly qualified, but if his style lacks zeal, the students would probably give him a low rating
The reality of the halo effect was confirmed in a classic study in which subjects were given of traits such as intelligent, skillful, practical, industrious, determined, and warm and were at to evaluate the person to whom those traits applied. When those thats were used, the persona judged to be wise, humorous, popular, and imaginative. When the same list was just slightly moda fied-cold was substituted for warm-a completely different set of perceptions was obtained Clearly, the subjects were allowing a single trait to influence their overall impression of the person being judged.
The propensity for the halo effect to operate is not random. Research suggests that it is likely to be most extreme when the traits to be perceived are ambiguous in behavioral terms, when the traits have moral overtones, and when the perceiver is judging traits with which he or she has had limited experience.10
Contrast Effects There is an old adage among entertainers who perform in variety shows: Never follow an act that has kids or animals in it. Why? The common belief is that audiences love chil dren and animals so much that you’ll look bad in comparison. This example demonstrates how contrast effects can distort perceptions. We don’t evaluate a person in isolation. Our reaction to one person is influenced by other persons we have recently encountered
Perception Individual Decision Making
An illustration of how contrast effects operate is an interview situation in which an interviewer sees a pool of job applicants. Distortions in any given candidate’s evaluation can occur as a result of his or her place in the interview schedule. A candidate is likely to receive a more favorable evaluation if preceded by mediocre applicants and a less favorable evaluation if preceded by strong applicants.
Projection It’s easy to judge others if we assume that they’re similar to us. For instance, if you want challenge and responsibility in your job, you assume that others want the same. Or, you’re honest and trustworthy, so you take it for granted that other people are equally honest and trustworthy. This tendency to attribute one’s own characteristics to other people–called projection can distort per ceptions made about others.
People who engage in projection tend to perceive others according to what they themselves are like rather than according to what the person being observed is really like. When managers engage in projection, they compromise their ability to respond to individual differences. They tend to see people as more homogeneous than they really are.
Stereotyping When we judge someone on the basis of our perception of the group to which he or she belongs, we are using the shortcut called stereotyping. We saw the problems stereotyping can create at the opening of this chapter: All Muslims are not terrorists!
Let’s begin by acknowledging that generalization can have advantages. It’s a means of simplifying a complex world, and it permits us to maintain consistency. It’s less difficult to deal with an unman ageable number of stimuli if we use stereotypes. As an example, assume you’re a sales manager look ing to fill a sales position in your territory. You want to hire someone who is ambitious and hardwork ing and who can deal well with adversity. You’ve had success in the past by hiring individuals who participated in athletics during college, So you focus your search by looking for candidates who part tic pated in collegiate athletics. In so doing, you have cut down considerably on your search time. Furthermore, to the extent that athletes are ambitious, hardworking, and able to deal will adversity, the use of this stereotype can improve your decision making problem, of course, is when we inaccurately stereotype 12 All college athlete necessarily ambitious, hardworking, or good at dealing with adversity
In organizations, we frequently hear comments that represent stereotypes based on gender, age, race, ethnicity, and even weight:13 “Women won’t relocate for a prowoulon,”men aren’t interested in child care;” “older workers can’t learn new skills: “Asian immigrants are hardworking and conscientious; overweight people lack discipline.” From a perceptual standpoint, if people expect to see these stereo types, that is what they will perceive, whether or not they are accurate,
Obviously one of the problems of stereotypes is that they are widespread, despite the fact that they may not contain a shred of truth or that they may be irrel evant. Their being widespread may mean only that many people are making the same maccurate perception on the basis of a false premise about a group.
Perception Individual Decision Making
Specific Applications in Organizations
People in organizations are always judging each other. Managers must appraise their employees’ performances. We evaluate how much effort our coworkers are putting into their jobs. When a new person joins a work team, he or she is immediate all business leaders greedy and ately “sized up” by the other team members. In many cases, these judgments have dishonest? The general public’s important consequences for the organization. Let’s briefly look at a few of the more perception of businesspeople as obvious applications. unethical is shaped by the vast form minimally, they’ll tend to behave so as to meet those low expectations. The result then she the expectations become reality
An interesting illustration of the self-fulfilling prophecy is a study undertaken with 105 soldiers the Israeli Defense Forces who were taking a 15-week combat command course the four instructors were told that one third of the specific incoming trainees had high potential had normal potential, and the potential of the rest was unknown. In reality, the trainees were domly placed into those categories by the researchers. The results confirmed the existence of fingrophecy. The trainees whom instructors were told had high potential scored sionifi
her objective achievement tests, exhibited more positive attitudes, and held their leaders in higher regard than did the other two groups. The instructors of the supposedly high-potential trainees got better results from them because the instructors expected it.
Perception Individual Decision Making
Ethnic Profiling Following the Japanese attack on Pearl Harbor, 120,000 Americans of Japanese heritage-most living on the West Coast-were required to relocate into detention camps. Many of them were forced to stay there throughout World War II. The reason for this action? The U.S. government feared that these Americans might hold pro-Japanese attitudes and spy against the United States. Over time, most Americans came to see this as a horrible mistake and a dark footnote in American history.
The internment of Japanese Americans during World War II is an example of profiling-a form of stereotyping in which a group of individuals is singled out—typically on the basis of race or ethnicity for intensive inquiry, scrutinizing, or investigation. Most Americans look back in shame at the actions the U.S. government took against Japanese Americans some 60 years ago; however, profiling continues in the United States and in other countries. African-American drivers continue to be stopped by police in some U.S. cities merely because of the color of their skin. Middle-Easterners are closely scrutinized when they go through security at U.S. airports. In Great Britain, people from Ireland are often singled potential terrorists. And in Israel, every Arab is seen as a potential suicide bomber. But we’re interested in organizational behavior. And since September 11, 2001. ethnic profiling has ased implications for OB, specifically as it relates to people of Arab ancestry. Coworkers and mai bakat Arab colleagues through new eyes. They question why these colleagues may dress ditter engage in religious practices they don’t understand. Many wonder whether colleagues errorist organizations. The result? This suspicious climate creates distrust and conflicts motivation, and potentially reduces job satisfaction for ethnic minorities. It’s also likely to quality job candidates when profiling takes place during the employment screening Process .
Since September 11th, ethnic profiling has become the subject of much debate. On one side. proponents argue that profiling people of Arab descent is necessary in order to prevent cases of it rorism. On the other side, critics argue that profiling is demeaning, discriminatory, and an inelletive way to find potential terrorists. The debate is important and implies the need to balance the nights of individuals against the greater good of society. Organizations need to sensitize employees and managers to the damage that profiling can create. Diversity training programs, which we discuss in Chapter 17. are increasingly being expanded to particularly address ethnic stereotyping and pro filing. Performance Evaluation Although the impact of performance evaluations on behavior will be dis cussed fully in Chapter 17. it should be pointed out here that an employee’s performance apprais very much dependent on the perceptual process. An employee’s future is closely tied to his or her appraisal promotions, pay raises, and continuation of employment are among the most obvious out comes. The performance appraisal represents an assessment of an employee’s work. Although the appraisal can be objective (for example, a salesperson is appraised on how many dollars of sales she gen erates in her territory), many jobs are evaluated in subjective terms. Subjective measures are easier to implement, they provide managers with greater discretion, and many jobs do not readily lend them selves to objective measures. Subjective measures are, by definition, judgmental. The evaluator forms a general impression of an employee’s work. To the degree that managers use subjective measures in appraising employees, what the evaluator perceives to be good or bad employee characteristics or behaviors will significantly influence the outcome of the appraisal.
Employee Effort An individual’s future in an organization is usually not dependent on performance alone. In many organizations, the level of an employee’s effort is given high importance. Just as teachers frequently consider how hard you try in a course as well as how you perform on examinations, so, often, do managers. An assessment of an individual’s effort is a subjective judgment susceptible to perceptual distortions and bins.
Perception Individual Decision Making
The Link Between Perception and Individual Decision Making
Individuals in organizations make decisions. That is, they make choices from among two or more alternatives. Top managers, for instance, determine their organization’s goals, what products or services to offer, how best to finance operations, or where to locate a new manufacturing plant Middle and lower-level managers determine production schedules, select new employees, and decide how Day raises are to be allocated. Of course, making decisions is not the sole province of managers. Nonmanagerial employees also make decisions that affect their jobs and the organizations for which they work. The more obvious of these decisions might include whether or not to come to work on any given day, how much effort to put forth once at work, and whether or not to comply with a request made by the boss. In addition, an increasing number of organizations in recent years have been empowering their ]managerial employees with job-related decision making authority that historically was reserved for managers. Individual ow individuals in organizations make decisions decision making, therefore, is an important part of organizational behav and the quality of their final choices are largely .
on it to get to work, you have a problem that requires a decision on your part. Unfortunately, most problems don’t come neatly packaged with a label “problem” clearly displayed on them. One per son’s problem is another person’s satisfactory state of affairs. One manager may view her division’s two percent decline in quarterly sales to be a serious problem requiring immediate action on her part.
contrast, her counterpart in another division of the same company, who also had a two percent sales decrease, may consider that percentage quite acceptable. So the awareness that a problem exists and that a decision needs to be made is a perceptual issue.
Moreover, every decision requires the interpretation and evaluation of information. Data are typ ically received from multiple sources, and they need to be screened, processed, and interpreted, Which data, for instance, are relevant to the decision and which are not? The perceptions of the decision maker will answer that question. Alternatives will be developed, and the strengths and weaknesses of each will need to be evaluated. Again, because alternatives don’t come with red flags identifying them as such or with their strengths and weaknesses clearly marked, the individual deci sion maker’s perceptual process will have a large bearing on the final outcome. Finally, throughout the entire decision process, perceptual distortions often surface that have the potential to bias analysis and conclusions.
How Should Decisions Be Made?
Let’s begin by describing how individuals should behave in order to maximize or optimize a certain outcome. We call this the rational decision-making process.
Perception Individual Decision Making
The Rational Decision-Making Process
The optimizing decision maker is rational. That is, he or she makes consistent, value-maximizing choices within specified constraints. 20 These choices are made following a six-step rational decision-making model. Moreover, specific assumptions underlie this model.
The Rational Model The six steps in the rational decision-making model are listed in Exhibit 5-3.
The model begins by defining the problem. As noted previously, a problem exists when there is a discrepancy between an existing and a desired state of affairs. If you calculate your monthly expenses and find you’re spending $100 more than you allocated in your budget, you have defined a problem. Many poor decisions can be traced to the decision maker overlooking a problem or defining the wrong problem.
Once a decision maker has defined the problem, he or she needs to identify the decision criteria that will be important in solving the problem. In this step, the decision maker determines what is relevant in making the decision. This step brings the decision maker’s interests, values, and similar personal preferences into the process. Identifying criteria is important because what one person thinks is relevant another person may not. Also keep in mind that any factors not identified in this step are considered irrelevant to the decision maker.
The criteria identified are rarely all equal in importance. So the third step requires the decision maker to weight the previously identified criteria in order to give them the correct priority in the decision.
The fourth step requires the decision-maker to generate possible alternatives that could succeed in resolving the problem. No attempt is made in this step to appraise these alternatives, only to list them.
Perception Individual Decision Making
EXHIBIT 5-3 Steps in the Rational Decision-Making Model
- Define the problem
- Identify the decision criteria.
- Allocate weights to the criteria.
- Develop the alternatives.
- Evaluate the alternatives.
- Select the best alternative.
problem or opportunity presented. Why is creativity important to decision making? It allows the decision maker to more fully appraise and understand the problem, including seeing problems others can’t see. However, creativity’s most obvious value is in helping the decision maker identify all viable alternatives.
Creative Potential Most people have creative potential that they can use when confronted with a decision-making problem. But to unleash that potential, they have to get out of the psychological ruts many of us get into and learn how to think about a problem in divergent ways.
We can start with the obvious. People differ in their inherent creativity. Einstein, Edison, Picasso and Mozart were individuals of exceptional creativity. Not surprisingly, exceptional creativity is scarce. A study of the lifetime creativity of 161 men and women found that fewer than 1 percent were exceptionally creative. But 10 percent were highly creative and about 60 percent were somewhat creative. This suggests that most of us have creative potential; we just need to learn to unleash it.
Three-Component Model of Creativity Given that most people have the capacity to be at least moderately creative, what can individuals and organizations do to stimulate employee creativity? The best answer to this question lies in the three-component model of creativity. Based on an extensive body of research, this model proposes that individual creativity essentially requires expertise, creative thinking skills, and intrinsic task motivation (see Exhibit 5-4). Studies confirm that the higher the level of each of these three components, the higher the creativity.
Expertise is the foundation for all creative work. Picasso’s understanding of art and Einstein’s knowledge of physics were necessary conditions for them to be able to make creative contributions to their fields. And you wouldn’t expect someone with a minimal knowledge of programming to be very creative as a software engineer. The potential for creativity is enhanced when individuals have abilities, knowledge, proficiencies, and similar expertise in their field of endeavor.
Perception Individual Decision Making
The second component is critive thinking skills. This encompasses personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light. For instance, the following individual traits have been found to be associated with the development of creative ideas: intelligence, independence, self-confidence, risk-taking, an internal locus of control, tolerance for ambiguity, and perseverance in the face of frustration. The effective use of analogies allows decision makers to apply an idea from one context to another. One of the most famous examples in which analogy resulted in a creative breakthrough was Alexander Graham Bell’s observation that it might be possible to take concepts that operate in the ear and apply them to his “talking box.” He noticed that the bones in the ear are operated by a delicate, thin membrane. He wondered why, then, a thicker and strong piece of membrane shouldn’t be able to move a piece of steel. Out of that analogy. the telephone was conceived. Of course, some people have developed their skill at being able to see problems in a new way. They’re able to make the strange familiar and the familiar strange, 28 For instance, most of us think of hens laying eggs. But how many of us have considered that a hen is only an egg’s way of making another egg?
The final component in our model is intrinsic task motivation. This is the desire to work on something because it’s interesting, involving, exciting, satisfying, or personally challenging. This motivational component is what turns creativity potential into actual creative ideas. It determines the extent to which individuals fully engage their expertise and creative skills. So creative people often love their work, to the point of seeming obsessed. Importantly, an individual’s work environment can have a significant effect on intrinsic motivation. Work environment stimulants that have been found to foster creativity include a culture that encourages the flow of ideas, makes fair and constructive judgments of ideas, and rewards and recognizes creative work; sufficient financial material, and information resources: freedom to decide what work is to be done and how to do it: a supervisor who communicates effectively, shows confidence in others, and supports the work group: and work-group members who support and trust each other.
Perception Individual Decision Making
How Are Decisions Actually Made in Organizations?
Are decision makers in organizations rational? Do they carefully assess problems, identify all relevant criteria, use their creativity to identify all viable alternatives, and painstakingly evaluate every alternative to find an optimal choice? For novice decision makers with little experience, decision makers faced with simple problems that have few alternative courses of action, or when the cost of searching out and evaluating alternatives is low, the rational model provides a fairly accurate description of the decision process. But such situations are the exception. Most decisions in the real world don’t follow the rational model. For instance, people are usually content to find an acceptable or reasonable solution to their problem rather than an optimal one. As such, decision-makers generally make limited use of their creativity. Choices tend to be confined to the neighborhood of the problem symptom and to the neighborhood of the current alternative. As one expert in decision making put it: “Most significant decisions are made by judgment, rather than by a defined prescriptive model.**?
The following reviews a large body of evidence to provide you with a more accurate description of how most decisions in organizations are actually made
Perception Individual Decision Making
Bounded Rationality
When you considered which college to attend, did you look at every viable alternative? Did you carefully identify all the criteria that were important in your decision? Did you evaluate each alternative against the criteria in order to find the optimal college? I expect the answers to these questions is probably “No.” Well, don’t feel bad. Few people made their college choice this way. Instead of optimizing, you probably satisfied.
When faced with a complex problem, most people respond by reducing the problem to a level at which it can be readily understood. This is because the limited information processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize. So people satisfied that is, they seek solutions that are satisfactory and sufficient.
Because the capacity of the human mind for formulating and solving complex problems is far too small to meet the requirements for full rationality, individuals operate within the confines of bounded rationality. They construct simplified models that extract the essential features from problems without capturing all their complexity. Individuals can then behave rationally within the limits of the simple model.
How does bounded rationality work for the typical individual Once problem is identified the search for criteria and alternatives begins. But the list of criteria likely to be far from exhaustive. The decision maker will identify a limited list un of the more conspicuous choices. These are the choices that are easy to find and that tend to be highly visible. In most cases, they will represent familiar criteria and previously tried-and-true solutions. Once this limited set of alternatives is identified, the decision maker will begin reviewing them. But the review will not be compre hensive-not all the alternatives will be carefully evaluated. Instead, the decision maker will begin with alternatives that differ only in a relatively small degree from the choice currently in effect. Following along familiar and well-worn paths, the decision-maker proceeds to review alternatives only until he or she identifies an alternative that is “good enough-one that meets an acceptable level of performance. The first alternative that meets the “good enough” criterion ends the search. So the final solution represents a satisficing choice rather than an optimal one.
One of the more interesting aspects of bounded rationality is that the order in which alternatives are considered is critical in determining which alternative is selected. Remember, in the fully rational decision-making model, all alternatives are eventually listed in a hierarchy of preferred order. Because all alternatives are considered, the initial order in which they are evaluated is irrelevant. Every potential solution would get a full and complete evaluation. But this isn’t the case with bounded rationality. Assuming that a problem has more than one potential solu tion, the satisficing choice will be the first acceptable one the decision-maker encounters. Because decision-makers use simple and limited models, they typically begin by identifying alternatives that are obvious, ones with which they are familiar, and those not too far from the status quo. The solutions that depart least from the status quo and meet the decision criteria are those most likely to be selected. A unique and creative alternative may present an optimizing solution to the problem; however, it’s unlikely to be chosen because an acceptable solution will be identified well before the decision-maker is required to search very far beyond the status quo.
Perception Individual Decision Making
Common Biases and Errors
In addition to engaging in bounded rationality, an accumulating body of research tells us that decision-makers allow systematic biases and errors to creep into their judgments. These come out of attempts to shortcut the decision process. To minimize effort and avoid difficult trade-offs, people tend to rely too heavily on experience, impulses, gut feelings, and convenient “rules of thumb.” In many instances, these shortcuts are helpful. However, they can lead to severe distortions from rationality. The following highlights the most common distortions.
Overconfidence Bias It’s been said that no problem in judgment and decision making is more prevalent and more potentially catastrophic than overconfidence.”
When we’re given factual questions and asked to judge the probability that our answers are correct, we tend to be far too optimistic. For instance, studies have found that, when people say they’re 65 to 70 percent confident that they’re right, they were actually correct only about 50 percent of the time. 56 And when they say they’re 100 percent sure, they tended to be 70 to 85 percent correct.
From an organizational standpoint, one of the more interesting findings related to overconfidence is that those individuals whose intellectual and interpersonal abilities are weakest are most likely to overestimate their performance and ability. So as managers and employees become more knowledgeable about an issue, the less likely they are to display overconfidence. And overconfidence is most likely to surface when organizational members are considering issues or problems that are outside their area of expertise,
Perception Individual Decision Making
Anchoring Bias The anchoring bias is a tendency to fixate on initial information as a starting point Once set, we then fail to adequately adjust for subsequent information. The anchoring bias occur Perception and Individual Decision Making mind appears to give a disproportionate amount of emphasis to the first information mual impressions, ideas, prices, and estimates carry undue weight relative to formation received later. 41
Anchors are widely used by professional people such as advertising writers, managers, politicians real estate agents, and lawyers where persuasion skills are important. For instance, ma mocku trial, one set of jurors was asked by the plaintiff’s attorney to make an award in the range of somit lion to Rs 25 million. Another set of jurors was asked for an award in the range of Rs 25 million to R$ 1 million. Consistent with the anchoring bias. the median awards were Rs 5 million versus RS 20 million in the two conditions.
Consider the role of anchoring in negotiations and interviews. Any time a negotiation takes place, so does anchoring. As soon as someone states a number, your ability to objectively in that number has been compromised. For instance, when a prospective employer asks how much you were making in your prior job, your answer typically anchors the employer’s offer. Most of us understand this and upwardly “adjust” our previous salary in the hope that it will encourage our new employer to offer us more. And anchoring can distort employment interviews. The initial information you might get when interviewing a job candidate is likely to anchor your assessment of the applicant and unduly influence how you interpret information that you obtain later
Confirmation Blas The rational decision-making process assumes that we objectively gather information. But we don’t. We selectively gather information. The confirmation bias represents a specific case of selective perception. We seek out information that reaffirms our past choices, and we discount information that contradicts past judgments.45 We also tend to accept information at face value that confirms our preconceived views, while being critical and skeptical of information that challenges these views. Therefore, the information we gather is typically biased toward supporting views we already hold. This confirmation bias influences where we go to collect evidence because we tend to seek out places that are more likely to tell us what we want to hear. It also leads us to give too much weight to supporting information and too little to contradictory information.
Availability Blas Many more people suffer from fear of flying than fear of driving in a car. The reason is that many people think flying is more dangerous. It isn’t, of course. With apologies ahead of time for this graphic example, if flying on a commercial airline was as dangerous as driving, the equivalent of two 747s filled to capacity would have to crash every week, killing all aboard, to match the risk of being killed in a car accident. But the media give a lot more attention to air accidents, so we tend to overstate the risk of flying and understate the risk of driving.
This illustrates an example of the availability bias, which is the tendency for people to base their judgments on information that is readily available to them.44 Events that evoke emotions, that are particularly vivid, or that have occurred more recently tend to be more available in our memory. As a result, we tend to be prone to overestimating unlikely events like an airplane crash. The availability bias can also explain why managers, when doing annual performance appraisals, tend to give more weight to recent behaviors of an employee than those behaviors of six or nine months ago.
Perception Individual Decision Making
Representative Bias Literally, thousands of students graduating in Delhi aspire to study at the St. Stephen’s College. The alumni of the college include public personalities like Rahul Gandhi, Kapil Sibal, Montek Singh Ahluwalia, and Barkha Dutt. The students assess the likelihood of an occurrence by trying to match it with a pre-existing category. This is representative bias. The students watch these personalities on television and think that they are like them.
We are all guilty of falling into the representative bias at times. Managers, for example, frequently predict the performance of a new product by relating it to a previous product’s success. Or if three graduates from the same college were hired and turned out to be poor performers managers may predict that a current job applicant from the same college will not be a good employee.
Escalation of Commitment Error Another distortion that creeps into decision practice is a tendency to escalate commitment when a decision stream represents a series of decisions.15 Escalation of commitment refers to staying with a decision even when there is clear evidence that it’s wrong. For example, a friend of mine had been dating a woman for about four years. Although he admitted that things weren’t going too well in the relationship, he informed me that he was going to marry the woman. A bit surprised by his decision, I asked him why. He responded: “I have a lot invested in the relationship!”
It has been well documented that individuals escalate commitment to a failing course of action when they view themselves as responsible for the failure. That is they “throw good money after bad” to demonstrate that their initial decision wasn’t wrong and to avoid having to admit they made a mistake. Escalation of commitment is also congruent with evidence that people try to appear consistent in what they say and do. Increasing commitment to previous actions conveys consistency.
Escalation of commitment has obvious implications for managerial decisions. Many an organization has suffered large losses because a manager was determined
to prove his or her original decision was right by continuing to commit resources to Krispy Kreme CEO Scott Livengood Illustrates the use of the
what was a lost cause from the beginning. In addition, consistency is a characteristic representative bias in launching the often associated with effective leaders. So managers, in an effort to appear effective,
Randomness Error Human beings have a lot of difficulty dealing with chance. Most of us like to believe we have some control over our world and our destiny. Although we undoubtedly can control a good part of our future by rational decision making, the truth is that the world will always contain random events.
Consider stock price movements. In spite of the fact that short-term stock price changes are essentially random, a large proportion of investors or their financial advisors-believe they can predict the direction that stock prices will move. For instance, when a group of subjects was given stock prices and trend information, these subjects were approximately 65 percent certain they could predict the direction stocks would change. In actuality, these individuals were correct only 49 per cent of the time about what you’d expect if they were just guessing.
Decision making becomes impaired when we try to create meaning out of random events. One of the most serious impairments caused by random events is when we turn imaginary patterns into superstitions. These can be completely contrived (“I never make important decisions on a Friday the 13th”) or evolve from a certain pattern of behavior that has been reinforced previously wear my lucky tieto important meetings”). Although we all engage in some superstitious behavior i
I always can be debilitating when it affects daily judgments or biases major decisions. At the extreme, some decision makers become controlled by their superstitions-making it nearly impossible for them to change routines or objectively process new information. Hindsight Bias The hindsight bias is the tendency for us to believe falsely that we’d have accuratel predicted the outcome of an event, after that outcome is actually known. 15 When something hap pens and we have accurate feedback on the outcome, we seem to be pretty good at concluding thatescalation of commitment An increased commitment to a previous decision in spite of negative information
Perception Individual Decision Making
hindsight bias The tendency for us to believe falsely that we’d have accurately predicted the outcome of an event, after that outcome is actually known.this outcome was relatively obvious. For instance, a lot more people seem to have been sure about the inevitability of who would win the cricket on the day after the game than they were the day before 19
What explains the hindsight bias? We apparently aren’t very good at recalling the way an uncertain event appeared to us before we find out the actual results of that event. On the other hand, we seem to be fairly well adept at reconstructing the past by overestimating what we knew beforehand based on what we learned later. So the hindsight bias seems to be a result of both selective memory and our ability to reconstruct earlier predictions.
The hindsight bias reduces our ability to learn from the past. It permits us to think that we’re better at making predictions than we really are and can result in our being more confident about the accuracy of future decisions than we have a right to be. If, for instance, your actual predictive accuracy is only 40 percent, but you think it’s 90 percent, you’re likely to become falsely overconfident and less vigilant in questioning your predictive skills.
Perception Individual Decision Making
Intuition
Intuitive decision-making is an unconscious process created out of distilled experience. It doesn’t necessarily operate independently of rational analysis; rather, the two complement each other. And, importantly, intuition can be a powerful force in decision making For instance, research on chess playing provides an excellent illustration of how intuition works.52
Novice chess players and grand masters were shown an actual, but unfamiliar, Master chess player Vishwanathan chess game with about 25 pieces on the board. After 5 or 10 seconds, the pieces Anand effectively uses interactive were removed and each was asked to reconstruct the pieces by position. On aver decision making during chess age, the grand master could put 23 or 24 pieces in their correct squares, while the tournaments. Based on his expertise able to replace only 6. Then the exercise was changed. This time the chess champion can quickly choose pieces were placed randomly on the board. Again, the novice got only about 6 cor. alternative moves while still being under great pressure to make the but so did the grand master! The second exercise demonstrated that the right decision. grand master didn’t have any better memory than the novice. What he did have was the ability, based on the experience of having played thousands of chess games, to recognize patterns and clusters of pieces that occur on chessboards in the course of games. Studies further show that chess professionals can play 50 or more games simultaneously, in which decisions often must be made in only seconds, and exhibit only a moderately lower level of skill than when playing one game under tournament conditions, for which decisions take half an hour or longer. The expert’s experience allows him or her to recognize the pattern in a situation and draw on previously learned information associated with that pattern to arrive at a decision choice quickly. The result is that the intuitive decision maker can decide rapidly based on what appears to be very limited information.
For most of the twentieth century, experts believed that the use of intuition by decision makers was irrational or ineffective. That’s no longer the case. There is growing recognition that rational analysis has been overemphasized and that, in certain instances, relying on intuition can improve decision making.
When are people most likely to use intuitive decision making? Eight conditions have been identified: (1) when a high level of uncertainty exists; (2) when there is little precedent to draw on; (3) when variables are less scientifically predictable; (4) when “facts” are limited; (5) when facts don’t clearly point the way: (6) when analytical data are of little use: (7) when there are several plausible alternative solutions from which to choose, with good arguments for each; and (8) when time is lim ited and there is pressure to come up with the right decision.
Although intuitive decision-making has gained in respectability, don’t expect people especially in North America, Great Britain, and other cultures in which rational analysis is the approved way of making decisions to readily acknowledge that they’re using it. People with strong intuitive abilities don’t usually tell their colleagues how they reached their conclusions. And since rational analul still continues to be more socially desirable, intuitive ability is often disguised or hidden. As one to executive commented, “Sometimes one must dress up a gut decision in data clothes to make it acceptable or palatable, but this fine-tuning is usually after the fact of the decision.”
Perception Individual Decision Making
Individual Differences
Decision-making in practice is characterized by bounded rationality, common human biases and errors, and the use of intuition. In addition, there are individual differences that create deviations from the rational model. In this section, we look at two individual difference variables: decision styles and gender.
Decision Styles Put Amit and Nadeem into the same decision situation and Amit almost always seems to take longer to come to a solution. Amit’s final choices aren’t necessarily always better than Nadeem’s, he’s just slower in processing information. In addition, if there’s an obvious risk dimension in the decision, Nadeem seems to consistently prefer a riskier option than does Amit. What this illustrates is that all of us bring our individual style to the decisions we make.
Research on decision styles has identified four different individual approaches to making deci sions. 16 This model was designed to be used by managers and aspiring managers, but its general framework can be used by any individual decision maker.
The basic foundation of the model is the recognition that people differ along two dimensions. The first is their way of thinking. Some people are logical and rational. They process information serially. In contrast, some people are intuitive and creative. They perceive things as a whole. The other dimension addresses a person’s tolerance for ambiguity. Some people have a high need to structure information in ways that minimize ambiguity, while others are able to process many thoughts at the same time. When these two dimensions are diagrammed, they form four styles of decision-making (see Exhibit 5-5). These are: directive, analytic, conceptual, and behavioral.
People using the directive style have a low tolerance for ambiguity and seek rationality. They are efficient and logical, but their efficiency concerns result in decisions made with minimal information and with few alternatives assessed. Directive types make decisions fast and they focus on the short run.
The analytic type has a much greater tolerance for ambiguity than do directive decision makers This leads to the desire for more information and consideration of more alternatives than is true for directives. Analytic managers would be best characterized as careful decision makers with the ability to adapt to or cope with novel and unexpected situations.
Individuals with a conceptual style tend to use data from multiple sources and consider many alter natives. Their focus is long range, and they are very good at finding creative solutions to problems.
The final category the behavioral style characterizes decision makers who have a strong concern for the people in the organization and their development. They’re concerned with the wellbeing of their subordinates and are receptive to suggestions from others. They tend to focus on the short term and to downplay the use of data in their decision making. This type of manager tries to avoid conflict and seeks acceptance.
Although these four categories are distinct, most managers have characteristics that fall into more than one. It’s probably best to think in terms of a manager’s dominant style and his or her backup styles. Some managers rely almost exclusively on their dominant style; however, more flexible managers can make shifts depending on the situation.
IIM business students, lower-level managers, and top executives tend to score highest in the analytic style. That’s not surprising given the emphasis that formal education, particularly business education, gives to developing rational thinking. For instance, courses in accounting, statistics, and finance all stress rational analysis. In contrast, evidence indicates that managers in China and Japan tend to rely more on directive and behavioral styles, respectively. This may be explained by the Chinese emphasis on maintaining social order and the Japanese’s strong sense of collectivism in the workplace.
Focusing on decision styles can be useful for helping you to understand how two equally intelligent people, with access to the same information, can differ in the ways they approach decisions and the final choices they make. It can also help you understand how individuals from different cultures might approach a decision problem.
Gender Recent research on rumination offers insights into kender differences in decision making. 58 Overall, the evidence indicates that women verall, the evidence indicates that women analyze decisions more than men. analyze decisions more than men.
Rumination refers to reflecting at length. In terms of decision making it means overthinking about problems. And women, in general, are more likely than men to engage in rumination. Twenty years of study find that women spend much more time than men in analyzing the past, present, and future. They’re more likely to overanalyze problems before making a decision and rehash the decision once it has been made. On the positive side, this is likely to lead to more careful consideration of problems and choices. However, it can make problems harder to solve, increase regret over past decisions, and increase depression. On this last point, women are nearly twice as likely as men to develop depression.
Why women ruminate more than men is not clear. Several theories have been suggested. One view is that parents encourage and reinforce the expression of sadness and anxiety more in girls than in boys. Another theory is that women, more than men, base their self-esteem and well-being on what others think of them. A third theory is that women are more empathetic and more affected by events in others’ lives, so they have more to ruminate about
This rumination tendency appears to be moderated by age. Gender differences surface early. By age 11, for instance, girls are ruminating more than boys. But this gender difference seems to lessen with age. Differences are largest during young adulthood and smallest after age 65, when both men and women ruminate the least 59
Organizational Constraints
The organization itself constrains decision-makers and thus can create deviations from the rational model Managers, for instance, shape their decisions to reflect the organization’s performance evaluation and reward system, to comply with the organization’s formal regulations, and to meet organizationally imposed time constraints. Previous organizational decisions also act as precedents to constrain current decisions.
Performance Evaluation Managers are strongly influenced in their decision making by the criteria on which they are evaluated. If a division manager believes that the manufacturing plants under his responsibility are operating best when he hears nothing negative, we shouldn’t be surprised to find his plant managers spending a good part of their time ensuring that negative information doesn’t reach the division boss. Similarly, if a college dean believes that an instructor should never fail more than 10 percent of her students-to fail more reflects on the instructor’s ability to teach-we should expect that instructors who want to receive favorable evaluations will decide not to fail too many stu dents.
Reward Systems The organization’s reward system influences decision makers by suggesting to them what choices are preferable in terms of personal payoff. For example, if the organization rewards risk aversion, managers are more likely to make conservative decisions. From the 1930s through the mid-1980s, General Motors consistently gave out promotions and bonuses to managers who kept a low profile, avoided controversy, and were good team players. The result was that GM managers became very adept at dodging tough issues and passing controversial decisions on to committees.
Formal Regulations Prateek, a shift manager at a McDonald’s restaurant in Cannaught Place. New Delhi, describes constraints he faces on his job: “I’ve got rules and regulations covering almost every decision I make-from how to make a burrito to how often I need to clean the restrooms. My job doesn’t come with much freedom of choice.”
Prateek’s situation is not unique. All but the smallest of organizations create rules, policies, pro cedures, and other formalized regulations in order to standardize the behavior of their members By programming decisions, organizations are able to get individuals to achieve high levels of per formance without paying for the years of experience that would be necessary in the absence of regulations. And of course, in so doing, they limit the decision maker choices.
System-Imposed Time Constraints Organizations impose deadlines on decisions For instance, department budgets need to be completed by next Friday. Or the report on new product development has to be ready for the executive committee to review by the first of the month. A host of decisions must be made quickly in order to stay ahead of the competition and keep customers satisfied. And almost all important decisions come with explicit deadlines. These conditions create time pressures on decision-makers and often make it difficult, if not impossible, to gather all the information they might like to have before making a final choice.
Historical Precedents Decisions aren’t made in a vacuum. They have a context, In fact, individual decisions are more accurately characterized as points in a stream of decisions
Decisions made in the past are ghosts that continually haunt current choices. For instance, commitments made in the past constrain current options. To use a social situation as an example, the decision you might make after meeting “Mr. or Ms. Right is more complicated if you’re already married than if you’re single. Prior
commitments in this case, having chosen to get married constrain your options, Government budget decisions also offer an illustration of our point. It’s common knowledge that the largest determining factor of the size of any given year’s budget is last year’s budget. Choices made today, therefore, are largely a result of choices made over the years.
Perception Individual Decision Making
Cultural Differences
The rational model makes no acknowledgment of cultural differences. But Arabs, for instance, don’t necessarily make decisions the same way that Canadians do.
Therefore, we need to recognize that the cultural background of the decision-maker can have a significant influence on his or her selection of problems, depth of analysis, the importance placed on logic and rationality, or whether organizational decisions should be made autocratically by an individual manager or collectively in groups,
Cultures, for example, differ in terms of time orientation, the importance of rationality, their belief in the ability of people to solve problems, and their preference for collective decision-making. Differences in time orientation help us understand why managers in Egypt will make decisions at a much slower and more deliberate pace than their American counterparts. Although rationality is valued in North America, that’s not true everywhere in the world. A North American manager might make an important decision intuitively, but he or she knows that it’s important to appear to proceed in a rational fashion. This is because rationality is highly valued in the West. In countries such as Iran, where rationality is not deified, efforts to appear rational are not necessary.
Some cultures emphasize solving problems, while others focus on accepting situations as they are. The United States falls into the former category: Thailand and Indonesia are examples of cultures that fall into the latter category. Because problem-solving managers believe they can and should change situations to their benefit, American managers might identify a problem long before their Thai or Indonesian counterparts would choose to recognize it as such.
Decision making by Japanese managers is much more group-oriented than in the United States. The Japanese value conformity and cooperation. So before Japanese CEOs make an important decision, they collect a large amount of information, which is then used in consensus-forming group decisions.
What About Ethics in Decision Making?
No contemporary discussion of decision making would be complete without the inclusion of ethica because ethical considerations should be an important criterion in organizational decision making This is certainly more true today than at any time in the recent past given the scandals at companies like Enron, World Com, Tyco International, Arthur Andersen, Citigroup. Merrill Lynch, ImClone Systems, Adelphia Communications. Sunbeam, and Rite Aid.
In this final section, we present three ways to frame decisions ethically and look at how ethical standards vary across national cultures.
Perception Individual Decision Making
Three Ethical Decision Criteria
An individual can use three different criteria in making ethical choices. The first is the utilitarian criterion, in which decisions are made solely on the basis of their outcomes or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number. This view tends to dominate business decision making. It is consistent with goals like efficiency, productivity, and high profit its. By maximizing profits, for instance, a business executive can argue he is securing the greatest good for the greatest number as he hands out dismissal notices to 15 percent of his employees Ethical issues, in context of Indian and U.K. managers, have been discussed in detail in Chapter 3
Another ethical criterion is to focus on rights. This calls on individuals to make decisions consis. tent with fundamental liberties and privileges as set forth in documents such as the Bill of Rights. An emphasis on rights in decision making means respecting and protecting the basic rights of individuals, such as the right to privacy, to free speech, and to due process. For instance, use of this criterion would protect whistle blowers-individuals who report unethical or illegal practices by their employer to outsiders—when they reveal unethical practices by their organization to the press or government agencies on the grounds of their right to free speech.
A third criterion is to focus on justice. This requires individuals to impose and enforce rules fairly and impartially so that there is an equitable distribution of benefits and costs. Union members typically favor this view. It justifies paying people the same wage for a given job, regardless of performance differences, and using seniority as the primary determination in making layoff decisions.
Each of these three criteria has advantages and liabilities. A focus on utilitarianism promotes efficiency and productivity, but it can result in ignoring the rights of some individuals, particularly those with minority representation in the organization. The use of rights as a criterion protects individuals from injury and is consistent with freedom and privacy, but it can create an overly legalistic work environment that hinders productivity and efficiency. A focus on justice protects the interests of the underrepresented and less powerful, but it can encourage a sense of entitlement that reduces risk taking, innovation, and productivity.
Decision makers, particularly in for-profit organizations, tend to feel safe and comfortable when they use utilitarianism. A lot of questionable actions can be justified when framed as being in the best interests of the organization” and stockholders. But many critics of business decision makers argue that this perspective needs to change.65 Increased concern in society about individual rights and social justice suggests the need for managers to develop ethical standards based on no utilitarian criteria. This presents a solid challenge to today’s managers because making decisions using criteria such as individual rights and social justice involves far more ambiguities than using utilitarian criteria such as effects on efficiency and profits. This helps to explain why managers are increasingly criticized for their actions. Raising prices, selling products with questionable effects on consumer health, closing down inefficient plants, laying off large numbers of employees, moving production overseas to cut costs, and similar decisions can be justified in utilitarian terms. But that may no longer be the single criterion by which good decisions should be judged.
Perception Individual Decision Making
Ethics and National Culture
What is seen as an ethical decision in China may not be seen as such in Canada. The reason is that there are no global ethical standards. 66 Contrasts between Asia and the West provide an illustration. Because bribery is commonplace in countries such as China, a Canadian working in China might face the dilemma: Should I pay a bribe to secure business if it is an accepted part of that country’s culture? Or how about this for a shock? A manager of a large U.S. company operating in China caught an employee stealing. Following company policy, she fired him and turned him over to the local authorities. Later, she was horrified to learn that the employee had been summarily executed.68
Although ethical standards may seem ambiguous in the West, criteria defining right and wrong are actually much clearer in the West than in Asia, Few issues are black and white there; most are gray. The need for global organizations to establish ethical principles for decision makers in countries such as India and China, and modifying them to reflect cultural norms, may be critical if high standards are to be upheld and if consistent practices are to be achieved.
Perception Individual Decision Making
Summary and Implications for Managers
Perception
Individuals behave in a given manner based not on the way their external environment actually is, but rather, on what they see or believe it to be. It’s the employee’s perception of a situation that becomes the basis for his or her behavior. Whether or not a manager successfully plans and organizes the work of his or her employees and actually helps them to structure their work more efficiently and effectively is far less important than how employees perceive the manager’s efforts. Similarly, issues such as fair pay for work performed, the validity of performance appraisals, and the adequacy of working conditions are not judged by employees in a way that ensures common perceptions; nor can we be assured that individuals will interpret conditions about their jobs in a favorable light. Therefore, to be able to influence productivity, it’s necessary to assess how workers perceive their jobs.
Absenteeism, turnover, and job satisfaction are also reactions to the individual’s perceptions. Di satisfaction with working conditions or the belief that there is a lack of promotion opportunities in the organization are judgments based on attempts to create meaning out of one’s job. The employee’s conclusion that a job is good or bad is an interpretation Managers must spend time understanding how individual interprets reality and when there is a significant difference between what is seen and what exists, try to eliminate the distortions. Failure to deal with the differences when individuals perceive the job in negative terms will result in increased absenteeism and turnover and lower job satisfaction.
Perception Individual Decision Making
Individual Decision Making
Individuals think and reason before they act. It is because of this that an understanding of how people make decisions can be helpful for explaining and predicting their behavior.
Under some decision situations, people follow the rational decision-making model. But for most people, and most non-routine decisions, this is probably more the exception than the rule, Few important decisions are simple or unambiguous enough for the rational model’s assumptions to apply. So we find individuals looking for solutions that satisfice rather than optimize, injecting biases and prejudices into the decision process, and relying on intuition.
Given the evidence we’ve described on how decisions are actually made in organizations, what can managers do to improve their decision-making? We offer five suggestions.
First, analyze the situation. Adjust your decision-making style to the national culture you’re operating in and to the criteria your organization evaluates and rewards. For instance, if you’re in a country that doesn’t value rationality, don’t feel compelled to follow the rational decision-making model or even to try to make your decisions appear rational. Similarly, organizations differ in terms of the importance they place on risk, the use of groups, and the like. Adjust your decision style to ensure that it’s compatible with the organization’s culture.
Second, be aware of biases. Then try to minimize their impact. Exhibit 5-6 offers some suggestions.
Third, combine rational analysis with intuition. These are not conflicting approaches to decision-making. By using both, you can actually improve your decision-making effectiveness. As you gain managerial experience, you should feel increasingly confident in imposing your intuitive processes on top of your rational analysis.
Fourth, don’t assume that your specific decision style is appropriate for every job. Just as organizations differ, so too do jobs within organizations. And your effectiveness as a decision-maker will increase if you match your decision style to the requirements of the job. For instance, if your decision-making style is directive, you’ll be more effective working with people whose jobs require quick action. This style might match well with managing stockbrokers. An analytic style, on the other hand, might be more effective in managing accountants, market researchers, or financial analysts.
Finally, try to enhance your creativity. Overtly look for novel solutions to problems, attempt to see problems in new ways, and use analogies. In addition, try to remove work and organizational barriers that might impede your creativity.
