Individual & Group
Decision Making
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mcja 602-95
Perception & Decision
Making
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How individuals make decisions &
the quality of final choices are
largely influenced by their
perceptions.
Requires interpretation and
evaluation of information
Most importantly, it requires a
focus on the right problem.
How Should Decisions
be Made?

Rational Decision Making Process
 define
the problem
 identify the decision criteria
 weight the identified decision
making criteria
 generate possible alternatives
 rate each alternative against the
dm criteria
 compute the optimal decision
Assumptions
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Assumes the decision maker is
rational
Assumes the problem is clear and
unambiguous
assumes the dm has complete
information
no time or cost constraints
choice will be one with the
maximum payoff
How decisions are
actually made...
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most decisions don’t result from
the rational dm model.
Issues:
 bounded
rationality
 intuition
 problem
identification
 making choices
Bounded Rationality
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limited capability of information
processing
simplify complex problems
choose first solution that is good
enough (I.e. satisfactory and
sufficient).
Making Choices
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Sources of bias:
 heuristics
(judgmental shortcuts)
 availability (information readily
available)
 representatives
(analogies
between a current issue and a
previous one).
Organizational
Constraints

People constrain their decisions to
reflect:
 performance
evaluation system
 reward system
 programmed routines
 time constraints
 historical precedent
Cultural Differences

Americans
 time
orientation
 time is a resource
 creation
of deadlines
 creation of timelines
Perception
and Individual
Decision Making
LEARNING OBJECTIVES
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Explain how two people can see the same thing and interpret it
differently.
List the three determinants of attribution.
Describe how shortcuts can assist in or distort our judgment of
others.
Explain how perception affects the decision-making process.
Outline the six steps in the rational decision-making model.
Describe the actions of the boundedly rational decision maker.
Identify the conditions in which individuals are most likely to
use intuition in decision making.
Describe four styles of decision making.
Define heuristics and explain how they bias decisions.
Explain the factors that influence ethical decision-making
behavior.
Person Perception:
Making Judgments About
Others
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Attribution Theory
 When individuals observe behavior, they attempt to
determine whether it is internally or externally caused.
Fundamental Attribution Error
 The tendency to underestimate the influence of external
factors and overestimate the influence of internal factors
when making judgments about the behavior of others.
 Self-Serving Bias
 The tendency for individuals to attribute their own successes
to internal factors while putting the blame for failures on
external factors.
Exhibit 3 - 2
Factors that
Influence Perception
Factors in the situation
•Time
•Work setting
•Social setting
Factors in the Perceiver
•Attitudes
•Motives
•Interests
•Experience
•Expectations
Perception
Factors in the target
•Novelty
•Motion
•Sounds
•Size
•Background
•Proximity
Factors
Influencing Perception
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The Perceiver
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The Target
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The Situation
Perception
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What is Perception?
 A process by which individuals organize and
interpret their sensory impressions in order to
give meaning to their environment.
Why Is it Important?
 Because people’s behavior is based on their
perception of what reality is, not on reality
itself.
 The world that is perceived is the world
that is behaviorally important.
Frequently Used
Shortcuts in Judging
Others
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Selective Perception
 People selectively interpret what they see on the basis of
their interest, background, experience, and attitudes.
Halo Effect
 Drawing a general impression about an individual on the
basis of a single characteristic.
Contrast Effects
 Evaluations of a person’s characteristics that are affected by
comparisons with other people recently encountered who
rank higher or lower on the same characteristics.
 Projection
 Attributing one’s own characteristics to other people
Stereotyping
 Judging someone on the basis of one’s perception of the
group to which that person belongs.
Exhibit 3 - 3
Attribution Theory
Observation
Attribution
of cause
Interpretation
High
Individual
behavior
Distinctiveness
Low
High
Consensus
Low
High
Consistency
Low
External
Internal
External
Internal
External
Internal
Assumptions of the
Rational DecisionMaking Model
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Problem Clarity The problem is clear and unambiguous.
Known Options The decision-maker can identify all relevant criteria and viable
alternatives.
Clear Preferences Rationality assumes that the criteria and alternatives can be ranked
and weighted.
Constant Preferences Specific decision criteria are constant and that the weights
assigned to them are stable over time.
No Time or Cost Constraints Full information is available because there are no time or cost
constraints.
Maximum Payoff The choice alternative will yield the highest perceived value.
Exhibit 3 - 5
Steps in the Rational DecisionMaking Model
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Define the Problem.
Identify the Decision Criteria.
Allocate Weights to the Criteria.
Develop the Alternatives.
Evaluate the Alternatives.
Select the Best Alternative.
How Do Decision-Makers
Identify & Select
Problems
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Problems that are visible tend to have a higher probability of
being selected than ones that are important. Why?
 It is easier to recognize visible problems.
 Decision-Makers want to appear competent and “on-top of
problems.”
 Decision-Makers self-interest affects problem selection
because it is usually in the Decision-Maker’s best interest to
address problems of high visibility and high payoff. This
demonstrates an ability to perceive and attack problems.
How Are Decisions
Actually Made in
Organizations?
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Bounded Rationality
 individuals make decisions by constructing
simplified models that extract the essential
features from problems without capturing all their
complexity.
 Intuitive Decision Making
 An unconscious process created out of detailed
experience.
Alternative Development
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Decision makers rarely seek optimum solutions but
satisficing ones.
Efforts made are simple and confined to the familiar.
 Efforts are incremental rather than comprehensive.
 Many successive limited comparisons rather than
calculating value for each alternative.
 This approach makes it unnecessary for the decision
maker to thoroughly examine an alternative and its
consequences.
 Thus the decision makers steps are small and limited
to comparisons of the current or familiar options.
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Making Choices
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Many decision makers rely on heuristics or
judgmental shortcuts in decision making. There are
two common categories of heuristics -Availability Heuristic --or the tendency of people to
base their judgments on information readily available to
them.
 Representative Heuristic -- The tendency to assess
the likelihood of an occurrence by trying to match it
with a preexisting category.
 Escalation of Commitment --an increased commitment
to a previous decision in spite of negative information,
all too often creeps into decision making.
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Decision-Making Styles
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Research on decision styles has identified four
different individual approaches to making decisions.
Directive Style -- people using this style have a low
tolerance for ambiguity and seek rationality.
 Analytic Style -- people using this style have a much
greater tolerance for ambiguity than do directive
decision makers.
 Conceptual Style -- people tend to be very broad in
their outlook and consider many alternatives
 Behavioral Style -- people who tend to work well with
others.
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Tolerance for Ambiguity
Exhibit 3-6
Decision-Style Model
High
Analytical
Conceptual
Directive
Behavioral
Low
Rational
Intuitive
Way of Thinking
Organizational
Constraints
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Performance Evaluations
Reward Systems
Programmed Routines
System-Imposed Time
Constraints
Historical Precedents
Ethics in Decision
Making
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An individual can use three different criteria in
framing or making ethical choices.
Utilitarian criterion -- Decisions are made solely on the
basis of their outcomes or consequences.
 Rights criterion -- Decisions consistent with
fundamental liberties and privileges as set forth in
documents like the Bill of Rights.
 Justice criterion -- Decisions that impose and enforce
rules fairly and impartially so there is an equitable
distribution of benefits and costs.
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Exhibit 3-7
Factors Affecting
Ethical DecisionMaking Behavior
Stage of moral
development
Organizational
environment
Locus of
control
Ethical
decision-making
behavior
Summary and
Implications for Managers
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Perception
 Individuals behave based not on the way their external environment actually
is but, rather, on what they see or believe it to be.
 Evidence suggests that what individuals perceive from their work situation
will influence their productivity more than will the situation itself.
 Absenteeism, turnover, and job satisfaction are also reactions to the
individual’s perceptions.
Individual Decision Making
 Individuals think and reason before they act.
 Under some decision situations, people follow the rational decision-making
model.
 What can managers do to improve their decision making?
 Analyze the situation.
 Be aware of biases.
 Combine rational analysis with intuition.
 Don’t assume that your specific decision style is appropriate for every
job.
 Use creativity-stimulation techniques.