DQ 3.1 – Decision-Making BiasesOur text mentions 6 common decision-making biases.  Tell us about one that you have either personally experienced or have made yourself and describe the following: 1) what bias was involved (name of bias and definition of that bias in your own words)2) what were the circumstances3) how did bias affect the outcome of the situationEssentials of
Organizational Behavior
13e
Stephen P. Robbins & Timothy A. Judge
Chapter 5
Personality and Values
Copyright ©2016 Pearson Education, Inc.
5-1
Chapter 6
Perception and Individual
Decision Making
Copyright ©2016 Pearson Education, Inc.
After studying this chapter
you should be able to:
1. Define perception, and explain the factors that influence it.
2. Explain attribution theory, and describe the common
shortcuts used in judging others.
3. Explain the link between perception and decision making.
4. Contrast the rational model of decision making with
bounded rationality and intuition.
5. Identify the common decision biases or errors.
6. Explain how individual differences and organizational
constraints affect decision making.
7. Contrast the three ethical decision criteria.
8. Define creativity, and discuss the three-stage model of
creativity.
6-3
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Perception
 Perception: A process by which
individuals organize and interpret
their sensory impressions in order to
give meaning to their environment
 The world as it is perceived is the
world that is behaviorally important
6-4
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Factors Influencing Perception
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6-5
Person Perception: Attribution Theory
 Attribution Theory: Suggests that perceivers
try to “attribute” the observed behavior to a type
of cause:
 Internal – behavior is believed to be under the
personal control of the individual
 External – the person is forced into the
behavior by outside events/causes
6-6
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Determinants of Attribution
 Distinctiveness – whether an individual
displays different behaviors in different
situations (the uniqueness of the act)
 Consensus – does everyone who faces a
similar situation respond in the same way as
the individual did
 Consistency – does the person respond the
same way over time
6-7
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Determination of Attribution
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6-8
Attribution Errors
 Fundamental attribution error:
 Tendency to underestimate the influence of
external factors and overestimate that of
internal factors
 Self-Serving Bias: Occurs when individuals
overestimate their own (internal) influence
on successes and overestimate the external
influences on their failures
 The basic process of attribution applies
across cultures, but Western cultures tend
to be more individualist, while Asian
cultures are more group oriented
6-9
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Shortcuts Used in Judging Others
 Selective Perception: A perceptual filtering
process based on interests, background, and attitude
 Halo Effect: Drawing a general impression based
on a single characteristic
 Contrast Effects: Our reaction is influenced by
others we have recently encountered (the context of
the observation)
 Stereotyping: Judging someone on the basis of the
perception of the group to which they belong
6-10
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The Link Between Perception
and Decision Making
 Decision making occurs as a reaction to
a perceived problem
 Perception influences:
 Awareness that a problem exists
 The interpretation and evaluation of
information
 Bias of analysis and conclusions
6-11
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Rational Decision-Making Model
 Rational decision-making model
1.
2.
3.
4.
5.
6.
Define the problem
Identify the decision criteria
Allocate weights to the criteria
Develop the alternatives
Evaluate the alternatives
Select the best alternative
 This model is seldom actually used: it’s more
of a goal than a practical method
6-12
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Assumptions of the Model
 Complete knowledge of the situation
 All relevant options are known in an
unbiased manner
 The decision maker seeks the highest
utility
6-13
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Bounded Rationality
 The limited information-processing capability
of human beings makes it impossible to
assimilate and understand all the information
necessary to optimize
 People seek solutions that are satisfactory and
sufficient, rather than optimal (they “satisfice”)
 Bounded rationality is constructing simplified
models that extract the essential features from
problems without capturing all their
complexity
6-14
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Decision Making
in Bounded Rationality
 Simpler than rational decision making, decision
making under bounded rationality is composed
of three steps:
1. Limited search for criteria and alternatives –
familiar criteria and easily found alternatives
2. Limited review of alternatives – focus on
alternatives, similar to those already in effect
3. Satisficing – selecting the first alternative that
is “good enough”
6-15
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Intuitive Decision Making
 Intuitive decision making: A nonconscious process created out of
distilled experience
 Increases with experience
 Can be a powerful complement to rational
analysis in decision making
6-16
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Common Biases and Errors
 Overconfidence Bias
 As managers and employees become more
knowledgeable about an issue, the less likely they are
to display overconfidence
 Anchoring Bias
 A tendency to fixate on initial information and fail to
adequately adjust for subsequent information
 Confirmation Bias
 Seeking out information that reaffirms our past
choices and discounting information that contradicts
past judgments
6-17
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Common Biases and Errors
 Availability Bias
 Basing judgments on information that is readily
available
 Escalation of Commitment
 Staying with a decision even when there is clear
evidence that it is wrong
 Risk Aversion
 Preferring a sure thing over a risky outcome
 Hindsight Bias
 Believing falsely that we could have predicted the
outcome of an event after that outcome is already
known
6-18
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Organizational Constraints
on Decision Making
 Performance evaluations
 Reward systems
 Formal regulations
 System-imposed time constraints
 Historical precedents
6-19
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Ethical Frameworks
for Decision Making
 Utilitarianism
 Provide the greatest good for the greatest
number
 Rights
 Make decisions consistent with fundamental
liberties and privileges
 Justice
 Impose and enforce rules fairly and
impartially so that there is equal distribution
of benefits and costs
6-20
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Creativity in Organizations
 Creativity: The ability to produce novel
and useful ideas
 Helps people:
 See problems others can’t see
 Better understand the problem
 Identify all viable alternatives
 Identify alternatives that aren’t readily
apparent
6-21
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Three-Stage Model of Creativity
Copyright © 2016 Pearson Education, Inc.
6-22
Creative Behavior
Steps:
1. Problem formulation: identify a
problem or opportunity that requires a
solution as yet unknown
2. Information gathering: possible
solutions incubate in an individual’s mind
3. Idea generation: develop possible
solutions from relevant information and
knowledge
4. Idea evaluation: evaluate potential
solutions and identify the best one
6-23
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Causes of Creative Behavior
 Cause of creative behavior:
1. Creative potential
 Expertise is the single most important
predictor of creative potential
2. Creative environment
 Motivation
 Rewards and recognition
6-24
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Creative Outcomes
 Creative outcomes: ideas or
solutions judged to be novel and
useful by relevant stakeholders
6-25
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Implications for Managers
 Behavior follows perception, so to influence
employee behavior at work, assess how employees
perceive their work.
 Make better decisions by recognizing perceptual
biases and decision-making errors we tend to
commit.
 Adjust your decision-making approach to the
national culture you’re operating in and to the
criteria your organization values.
 Combine rational analysis with intuition.
 Try to enhance your creativity.
6-26
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Keep in Mind…
1.
People have inherent biases in perception and
decision making
 Understanding those biases allows for better
prediction of behavior
2. Biases can be helpful
 Managers must determine when the bias may
be counterproductive
3. Creativity aids in decision making
 Helps to appraise, understand, and identify
problems
6-27
Copyright © 2016 Pearson Education, Inc.
Summary
1. Defined perception and explained the factors that influence
it.
2. Explained attribution theory, and described the common
shortcuts used in judging others.
3. Explained the link between perception and decision making.
4. Contrasted the rational model of decision making with
bounded rationality and intuition.
5. Identified the common decision biases or errors.
6. Explained how individual differences and organizational
constraints affect decision making.
7. Contrasted the three ethical decision criteria.
8. Defined creativity and discussed the three-stage model of
creativity.
6-28
Copyright © 2016 Pearson Education, Inc.
6-29
Copyright © 2016 Pearson Education, Inc.

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