Individual & Group Decision Making

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mcja 602-95

Perception & Decision Making 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

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... most decisions don’t result from

the rational dm model. Issues:

bounded rationality intuition problem identification making choices

Bounded Rationality

limited capability of information processing

simplify complex problems choose first solution that is good

enough (I.e. satisfactory and sufficient).

Making Choices 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

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.

LEARNING OBJECTIVES

Person Perception: Making Judgments About Others

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 - 2Factors that Influence Perception

Factors in the Perceiver•Attitudes•Motives•Interests•Experience•Expectations

Factors in the Perceiver•Attitudes•Motives•Interests•Experience•Expectations

Factors in the situation•Time•Work setting•Social setting

Factors in the situation•Time•Work setting•Social setting

Factors in the target•Novelty•Motion•Sounds•Size•Background•Proximity

Factors in the target•Novelty•Motion•Sounds•Size•Background•Proximity

PerceptionPerception

Factors Influencing Perception

The Perceiver

The Target

The Situation

Perception

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

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 - 3Attribution Theory

Observation Interpretation Attributionof cause

Ind

ivid

ual

Ind

ivid

ual

beh

avio

rb

ehav

ior

DistinctivenessDistinctiveness

ConsensusConsensus

ConsistencyConsistency

ExternalExternal

ExternalExternal

InternalInternal

InternalInternal

High

Low

ExternalExternal

InternalInternal

High

Low

High

Low

Assumptions of the Rational Decision-Making Model

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 - 5Steps 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.

How Do Decision-Makers Identify & Select Problems

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?

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 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.

Making Choices 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.

Decision-Making Styles 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.

Exhibit 3-6Decision-Style Model

Analytical

BehavioralDirective

Conceptual

Low

High

Rational Intuitive

Way of Thinking

Tol

eran

ce f

or A

mb

igu

ity

Organizational Constraints

Performance Evaluations Reward Systems Programmed Routines System-Imposed Time

Constraints Historical Precedents

Ethics in Decision Making

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.

Exhibit 3-7Factors Affecting Ethical Decision-Making Behavior

Stage of moral development

Ethicaldecision-making

behavior

Organizationalenvironment

Locus ofcontrol

Summary and Implications for Managers

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.