Decision Making Notes

Perception

• Perception: The act of seeing what is there, influenced by the perceiver, object, and environment.

• Stephen Robbins: Perception is a process of organizing and interpreting sensory impressions to give meaning to the environment. What we perceive can differ from objective reality.

Factors that Influence Perception

• Perceiver: Personal characteristics (attitudes, personality, motives, interests, past experiences, and expectations) influence interpretation.

• Target: Characteristics of the target (e.g., how something looks, sounds, feels) and its relationship to its background influence perception. Grouping close and similar things together also matters.

  • Example: A confident employee might be perceived as a leader.

• Context/Situation: Time, location, light, heat, and situational factors influence attention.

  • Example: Lateness during bad weather vs. on a clear day.

Person Perception

• Perceptions people form about each other.

Attribution Theory

• Explains how we judge people differently based on the meaning we attribute to their behavior.

• Example: Interpreting smiles as cooperative, exploitative, or competitive.

Types of Attribution

• Internal Causation (Dispositional): Behavior believed to be under the personal control of the individual.

• External Causation (Situational): Behavior believed to be caused by the situation.

Kelley’s Covariation Model (Three Factors)

• Distinctiveness: Whether an individual displays different behaviors in different situations.

• Consensus: Whether everyone in a similar situation responds the same way.

• Consistency: The extent to which the person behaves like this every time the situation occurs.

Common Attribution Errors

• Errors or biases distort attributions. We underestimate external factors and overestimate internal factors when judging others.

Fundamental Attribution Error

• Overemphasizing internal factors (personality) and underestimating situational factors when explaining others' behavior.

  • Example: A manager assumes a salesperson's underperformance is due to laziness, not competition.

Self-Serving Bias

• Distorting reality to protect one's ego.

  • Example: Team leader attributes project success to their leadership but blames failure on an uncooperative team or market conditions.

Common Shortcuts in Judging Others

Selective Perception

• Unconsciously focusing on certain aspects of the environment while ignoring others, leading to biased interpretations and stereotyping.

  • Example: A manager notices achievements of someone from the same university while overlooking others' contributions.

Halo Effect

• Overall impression of a person influences how others feel and think about their specific traits.

  • Example: Assuming a charismatic person is also a great leader.

Contrast Effects

• Perception is influenced by comparing something to something else, making differences appear greater than they are.

  • Example: Comparing an employee to an underperforming one and perceiving their performance as outstanding.

Stereotyping

• Judging someone based on our perception of the group to which they belong.

  • Example: Assuming a younger IT candidate is more tech-savvy or an older candidate will struggle with new technology based on age.

The Link Between Perception and Individual Decision

• Individuals make decisions (choices from alternatives). Decision-making should be objective but is influenced by perceptions.

• Individual decision-making is important at all levels of an organization.

Key Aspects of Decision-Making

• Problem Recognition: What one person sees as a problem, another may view as acceptable.

• Information Processing: Individuals filter and interpret information differently.

• Evaluating Alternatives: People judge options based on their perceptions, leading to biased choices.

• Influence of Social Pressure: People struggle to say "no" due to perceived discomfort.

The Rational Model, Bounded Rationality, and Intuition

• Rational Model: Assumes individuals make decisions by logically evaluating all options.

• Bounded Rationality: Acknowledges limitations in information and cognitive resources, leading to "good enough" decisions.

• Intuition: Relies on subconscious processing and pattern recognition for quick judgments.

Rational Decision Making

• Assumes individuals are perfectly rational, gathering and processing all relevant information to make the best decision.

• Rational decisions follow a six-step rational decision-making model.

• In simpler terms:

  • Have all the information.

  • List all possible options without any bias.

  • Choose the best option based on satisfaction.

Reality vs. The Model

• People don't perfectly follow this model. They settle for something that's "good enough" because:

  • They don't have all the information.

  • They limit options.

  • They focus on easily accessible options.

Bounded Rationality

• Making decisions based on available information, rather than finding the perfect solution.

• Individuals make decisions based on a "good enough" or "satisficing" approach, accepting the first acceptable alternative.

Intuition and Judgment

• Decisions made without conscious reasoning, relying on subconscious processing and pattern recognition.

• Intuition can be useful for setting up a hypothesis but is unacceptable as proof.

Common Biases and Errors in Decision Making

Overconfidence Bias

• Tendency to be overconfident about our abilities and unaware of this bias.

Anchoring Bias

• Tendency to fixate on initial information and fail to adjust for subsequent information.

• Used in advertising, management, politics, real estate, and law.

Confirmation Bias

• Seeking, interpreting, and remembering information that confirms existing beliefs, while ignoring contradictory information.

Availability Bias

• Relying on readily available or easily recalled information when making judgments.

• Can lead to flawed assessments because it assumes information that comes to mind quickly is more representative.

• Managers give more weight to recent employee behaviors in performance appraisals.

Escalation of Commitment

• Continuing to invest in a decision or project, even when it is failing.

  • Cognitive Biases: Sunk-cost fallacy, confirmation bias, and framing effects.

  • Emotional Factors: Fear of failure, anticipated regret, and ego threats.

  • Social Influences: Desire to maintain reputation or avoid embarrassment.

Randomness Error

• Mistakenly believing we can control or predict the outcome of random events.

  • Superstitions: Avoiding decisions on Friday the 13th.

  • Lucky Charms: Wearing a "lucky" item.

• We like to feel in control and find meaning in everything.

Risk Aversion

• Preferring guaranteed outcomes over risky ones, even when the risky option has a higher expected value.

  • Example: A CEO avoiding a high-risk investment to avoid personal accountability.

Hindsight Bias

• Believing, after an event, that we predicted or knew the outcome beforehand, even if we didn't.

• Distorts how we remember our past judgments and decisions.

Influences on Decision Making: Individual Differences and Organizational Constraints

• Decision-making is characterized by bounded rationality, biases, errors, and intuition.

Individual Differences

Personality

• Achievement-oriented people escalate commitment due to hating failure.

• Dutiful people are less likely to escalate commitment and more inclined to do what is best for the organization.

• Achievement-striving individuals are more susceptible to hindsight bias.

Gender

• In non-stressful situations, men and women are equal in quality.

• In stressful situations, men become more egocentric and make riskier decisions, while women become more empathetic.

General Mental Ability

• People with higher GMA process information more quickly and solve problems more accurately.

• Smart people are just as likely to fall prey to anchoring, overconfidence, and escalation of commitment.

• Once warned, more intelligent people learn more quickly to avoid decision-making errors.

Cultural Differences

• Cultures differ in time orientation, the value they place on rationality, their belief in the ability of people to solve problems, and their preference for collective decision making.

Time Orientation

• Egyptian managers make decisions slowly and carefully.

• American managers make decisions quickly.

Rationality

• In North America, rationality is highly valued.

• In places like Iran, rationality isn’t seen as essential

Problem-Solving vs. Acceptance

• In the United States, people believe problems should be solved and situations changed for the better

• In countries like Thailand or Indonesia, people are more likely to accept situations as they are rather than trying to change them.

Individual vs. Group Decision-Making

• In Japan, decisions are made collectively.

• In the United States, decisions are more individualistic.

Organizational Constraints

• Constraints can prevent biases and ensure decisions align with organizational goals but can also hinder rational evaluation.

Performance Evaluation Systems

• Managers are influenced by the criteria on which they are evaluated.

• Managers prioritize actions aligning with evaluation standards.

Reward Systems

• Managers make decisions aligned with expected rewards.

• Rewards act as incentives that guide actions.

Formal Regulations

• Rules and policies guide decision-making and ensure consistency.(e.g., Taco Bell shift manager)

• Examples:

  • Consistency: They ensure that customers receive the same quality of service or product no matter where they go.

  • Efficiency: Clear guidelines help employees know exactly what to do, reducing confusion.

  • Accountability: Rules make it easier to track whether employees are meeting expectations.

• Downsides:

  • Limited Freedom: his job doesn’t allow much freedom of choice because almost every decision is pre-determined by rules

  • Reduced Creativity: Too many regulations can prevent employees from coming up with innovative solutions to problems.

  • Dependency on Rules: Employees might rely too heavily on formal guidelines and avoid taking initiative, even for simple problems.

System-Imposed Time Constraints

• Deadlines impact the decision-making process, often making it harder to gather information or evaluate options.

• Examples:

  • Limited Information Gathering: With tight deadlines, managers may not have enough time to collect all relevant data, leading to decisions based on incomplete information.

  • Heuristic Thinking: Under time pressure, people often rely on mental shortcuts (heuristics) instead of carefully analyzing options. While this saves time, it can result in less optimal decisions.

  • Stress and Errors: Deadlines can create stress, which may impair judgment and lead to rushed or less thoughtful choices.

Historical Precedents

• Decisions today are influenced by past choices or established patterns.

  • Example: Budgeting is often based on last year’s budget.

Ethics In Decision Making

• Principles that guide organizations in making fair, just, and responsible choices.

Three Ethical Decision Criteria

• Utilitarianism: Maximizing benefits and minimizing harm for the majority ("the greater good").

• Rights-Based Ethics: Prioritizing individual rights (privacy, free speech, fair treatment).

• Justice Approach: Ensuring fairness in reward distribution and promoting equality.

Choosing Between Ethical Decision Criteria

• Situations often require choosing between different ethical approaches.

  • Utilitarianism:
    Promote the more productive employee because the company and more people will benefit from better management.

  • Rights-Based Ethics:
    Promote the long-time employee because they have the right to be rewarded for their loyalty.

  • Justice Approach:
    Based on a fair evaluation, the promotion should go to the one who deserves it more, regardless of how long they've been with the company

Behavioral Ethics

• How people actually behave in ethical situations, influenced by pressure, personal gain, or company culture.

Factors That Affect Ethical Behavior in the Workplace:

• Pressure from Management

• Personal Gain

• Company Culture

Lying

• Unethical and can affect decision-making by spreading false information.

  • Examples: Claiming to handle a project when not true and claiming to completing a course when not true.

Creativity, Creative Decision Making, and Innovation in Organizations

• Creativity is essential in any organization as it helps in problem-solving and innovation.

Creative Behavior (Four Steps):

• Problem Formulation: Identifying a problem or opportunity.

• Information Gathering: Gathering knowledge and exploring solutions.

• Idea Generation: Developing possible solutions.

• Idea Evaluation: Assessing and choosing the best solution.

Causes of Creative Behavior

Creative Potential

• Influenced by intelligence, personality, expertise, and ethical behavior.

Intelligence and Creativity

• Smarter individuals can solve complex problems and recall more information.

  • Example: In a company, an employee who loves researching and learning new skills can more easily find solutions to work-related problems.

Personality and Creativity

• Openness to new experiences, confidence, risk-taking, perseverance, and a positive attitude help.

  • Example: In a company, an employee who enjoys suggesting unique ideas and is not afraid of change often helps improve the company's processes.

Expertise and Creativity

• Knowledge and experience are the foundation of creativity.

  • Example: A graphic designer who has been editing images for a long time can create beautiful designs faster compared to a beginner.

Ethics and Creativity

• Some studies suggest that people who break rules tend to be more creative.

  • Example: In an office, some employees take shortcuts in their work to finish faster. Sometimes, this can be effective, but if it violates company rules, it may lead to problems.

Creative Environment

• A supportive workplace encourages creativity through motivation and teamwork.

Creative Outcomes (Innovation)

• Producing novel and useful ideas.

Motivation in Creativity

• Drives an individual's intensity, direction, and persistence toward a goal.

Three Key Concepts of Motivation

• Intensity: How much effort a person puts into a task.

  • In a company, there is an employee who always arrives early at the office and spends extra time improving their work.

• Direction: Ensuring that effort is channeled toward the correct objectives.

  • In a project, a team should stay focused on the company's goals so that their efforts won’t go to waste.

• Persistence: How long a person maintains their effort.

  • An employee, despite facing many personal problems, still finds ways to finish their work.

Early and Contemporary Theories of Motivation

Early Theories

Maslow's Hierarchy of Needs

• Outlines human needs in a hierarchical pyramid (basic survival to self-fulfillment).

Two-Factor Theory

• Job satisfaction and dissatisfaction are caused by different things.

• Hygiene factors (salary, working conditions) prevent dissatisfaction.

• Motivators (achievement, recognition) lead to job satisfaction.

McClelland's Theory of Needs (nAch, nPow, nAff)

• Individuals are driven by achievement, power, or affiliation.

Contemporary Theories

Self-Determination Theory (SDT)

• Emphasizes intrinsic motivation (competence, autonomy, relatedness).

Cognitive Evaluation Theory (CET)

• How external factors affect intrinsic motivation.

Self-Concordance

• Individuals are more motivated when their goals align with their core values and interests.

Introduction to Goal-Setting Theory (Edwin Locke)

• Goals are a primary driving force of human action.

Importance of Specific and Challenging Goals

• Specific goals lead to higher performance than vague goals. Challenging but attainable goals energize individuals.

Role of Feedback in Performance

• Feedback is essential for goal achievement.

Factors Affecting Goal Achievement

• Goal Commitment:
  Individuals need to be committed to their goals for them to be effective.

• Task Characteristics:
  Goal setting is more effective for tasks that are not too complex, and individuals have some control over how they are accomplished.

• National Culture:
  Cultural values can influence how individuals perceive and respond to goals. For example, collectivist cultures may emphasize group goals over individual goals.

• Individual Foci: An individual's focus (e.g., learning vs. performance) can moderate the goal-setting process.

Management by Objectives (MBO)

• Collaborative goal setting between managers and employees.

Goal Setting and Ethics

• Goal Setting Ethics: should not encourage unethical behavior or create undue pressure that leads to harmful outcomes.

Other Contemporary Theories of Motivation

Self-Efficacy Theory

• An individual’s belief that they are capable of performing a task.

Increasing Self-Efficacy

• Enactive mastery (relevant experience).

• Vicarious modeling (seeing someone else doing the task).

• Verbal persuasion (being convinced you have the skills).

• Arousal (energized state).

Reinforcement Theory

• Actions are influenced by the environment.

• Positive outcomes (rewards) increase behavior.

• Negative outcomes (punishments) decrease behavior.

Operant Conditioning Theory

• People behave in certain ways to get something they want or avoid something they don’t want.

Behaviorism

• Rejects feelings and thoughts as causes of behavior. Behavior follows stimuli.

Social-Learning Theory

• Individuals can learn by being told or by observing others.

• People respond to how they perceive consequences.

Equity Theory Organizational Justice

• Employees are motivated by fairness.

• They compare their input and outcomes to those of others.

Choices Employees Make When They Perceive Inequity

• Change inputs

• Change outcomes

• Distort perceptions of self

• Distort perceptions of others

• Choose a different referent

• Leave the field (quit the job)

Organizational Justice

• How employees evaluate fairness in their working environment.

Distributive Justice

• Fairness of outcomes (salary, promotions).

Procedural Justice

• Fairness of the processes used to make decisions.

Informational Justice

• How managers communicate information and decisions.

Interpersonal Justice

• How employees are treated on a personal level (dignity and respect).

Importance of Justice Outcomes

• Fairness leads to better performance and positive behaviors.

Ensuring Justice in Organizations

• Managers may follow rules or rely on emotions.

Cultural Influences on Justice

• Individualistic cultures favor performance-based rewards.

• Cultures valuing certainty prefer fixed pay structures.

• Cultures with relational values appreciate work-life balance.

Expectancy Theory

• Motivation depends on the strength of expectation of outcomes and their attractiveness.

  • Effort → Performance → Rewards → Goals

• Effort-Performance: Expecting effort leads to good performance

• Performance-Reward: Good performance leads to desired outcomes

• Reward-Personal Goals: Desired outcomes satisfy personal needs

Job Engagement

• Investment of an employee's physical, cognitive, and emotional energies into job performance.

  • Increased productivity

  • Fewer safety incidents

  • Lower turnover rates

Integrating Contemporary Theories of Motivation

• Expectancy Theory: Effort → Performance → Rewards → Goals

• Goal-Setting Theory: Goals direct effort and behavior.

• Achievement Motivation: High achievers are internally driven.

• Reinforcement Theory: Rewards reinforce performance.

• Equity Theory/Organizational Justice: Fairness matters.