MGT 321: Organizational Behavior
L E C T U R E R : TA S N U VA C H A U D H U RY
(TCY)
CHAPTER 6: PERCEPTION &
INDIVIDUAL DECISION MAKING
What is Perception?
 A process by which individuals organize and interpret
their sensory impressions in order to give meaning to their
environment.
 People’s behavior is based on their perception of what
reality is, not on reality itself.
Attribution Theory: Judging Others
 Our perception and judgment of others is significantly
influenced by our assumptions of the other person’s
internal state.
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When individuals observe behavior, they attempt to determine
whether it is internally or externally caused.
Internal causes are under that person’s control
 External causes are not under the person’s control
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Frequently used shortcuts in judging Others
 Selective Perception
People selectively interpret what they see on the basis of their interests,
background, experience, and attitudes
 Halo Effect
 Drawing a general impression about an individual on the basis of a single
characteristic
 Contrast Effects
 Evaluation of a person’s characteristics that are affected by comparisons
with other people recently encountered who rank higher or lower on the
same characteristics
 Stereotype
o Judging someone on the basis of one’s perception of the group to which that
person belongs
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Perception and Individual Decision Making
 Problem
 A perceived discrepancy between the current state of affairs and a
desired state
 Decisions
 Choices made from among alternatives developed from data
 Perception Linkage:
 All elements of problem identification and the decision-making
process are influenced by perception.
Problems must be recognized
 Data must be selected and evaluate
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Decision Making Models in Organization
 Rational Decision Making
 The “perfect world” model: assumes complete information, all
options known, and maximum payoff
 Six-step decision-making process
 Bounded Reality
 The “real world” model: seeks satisfactory and sufficient solutions
from limited data and alternatives
 Intuition
 Making decisions on the basis of experience, feelings, and
accumulated judgment
Common Biases and Errors in Decision Making
 Overconfidence Bias
Believing too much in our own ability to make good decisions –
especially when outside of own expertise
Anchoring Bias
 Using early, first received information as the basis for making
subsequent judgments
Confirmation Bias
 Selecting and using only facts that support our decision
Availability Bias
 Emphasizing information that is recent and most readily available
Escalation of Commitment
 Increasing commitment to a decision in spite of evidence that it is
wrong – especially if responsible for the decision!
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More Common Decision Making Errors
 Randomness Error

Creating meaning out of random events – superstitions
 Framing Bias
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Selecting and highlighting certain aspects of a situation while ignoring other aspects
 Sunk Costs Errors
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Forgetting that current actions cannot influence past events and relate only to future
consequences
 Self-serving Bias
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Taking quick credit for successes and blaming outside factors for failures
 Hindsight Bias
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Mistakenly believing that an event could have been predicted once the actual outcome is
known (after-the-fact)
Individual Differences in Decision Making
 Personality
 Conscientiousness may effect escalation of commitment
Achievement strivers are likely to increase commitment
 Dutiful people are less likely to have this bias
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Self-Esteem

High self-esteem people are susceptible to self-serving bias
• Women analyze decisions more than – rumination
• Differences develop early
 Mental Ability
Organizational Constraints
 Performance Evaluation
 Managerial evaluation criteria influence actions
 Reward Systems
 Managers will make the decision with the greatest personal payoff
for them
 Formal Regulations
 Limit the alternative choices of decision makers
 System-Imposed Time Constraints
 Restrict ability to gather or evaluate information
 Historical Precedents
 Past decisions influence current decisions
Improving Creativity in Decision Making
 Creativity
 The ability to produce novel and useful ideas
 Who has the greatest creative potential?
 Those who score high in Openness to Experience
 People who are intelligent, independent, self-confident, risk-taking,
have an internal locus of control, tolerant of ambiguity, low need for
structure, and who persevere in the face of frustration
Ethics in Decision Making
An individual can use three different criteria in framing or making
ethical choices. Each has advantages and disadvantages…
 Utilitarian -- Decisions are made solely on the basis of their outcomes
or consequences. The greatest good for the greatest number.
 Rights -- Decisions consistent with fundamental liberties and
privileges as set forth in documents like the Bill of Rights.
 Whistle blowers: Individuals who report unethical practices by their
employers to outside
 Justice -- Decisions that impose and enforce rules fairly and
impartially so there is an equitable distribution of benefits and costs.