Chapter 5 - Perception, individual decision making & creativity

What is perception?

• @@Perception@@: process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

  

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Person perception: making judgements about others

• @@Attribution theory@@: attempt to determine whether an individual’s behavior is internally or externally caused.

  

• @@Fundamental attribution theory@@: tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgements about the behavior of others.

• @@Self-serving bias@@: tendency for individuals to attribute their own success to internal factors and put the blame for failures on external factors.

• Frequently used shortcuts in judging others

  • @@Selective perception@@: tendency to selectively interpret what one sees on the basis of one's interests, background, experience and attitudes.
  • @@Halo effect@@: tendency to draw a general impression about an individual on the basis of a single characteristic.
  • @@Contrast effects@@: evaluation of a person’s characteristics that is affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics.
  • @@Stereotyping@@: judging someone on the basis of one’s perception of the group to which that person belongs.

• Specific applications of shortcuts in organizations

  • Employment interview → perceptual judgements are made that are often inaccurate.
  • Performance expectations → if a manager expects great things from her workers, they are likely to meet their expectations.
  • @@Self-fulfilling prophecy@@: situation in which a person inaccurately perceives a second person and the resulting expectations cause the second person to behave in ways consistent with the original perception.
  • Performance evaluation can be problematic because many shortcuts and subjectiveness is used.

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The link between perception and individual decision-making

• @@Decisions@@: choices from among to or more alternatives.
• @@Problem@@: discrepancy between the current state of affairs and some desired state.

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Decision making in organizations

• @@Rational decision making@@
  • Rational: characterized by making consistent, value maximizing choices within specified constraints.
  • Rational decision making model: decision making model that describes how individuals should behave in order to maximize some outcome.
  • Define the problem
  • Identify the decision criteria
  • Allocate weights to the criteria
  • Develop the alternatives
  • Evaluate the alternatives
  • Select the best alternative
• @@Bounded rationality@@: process of making decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.
• @@Intuitive decision making:@@ unconscious process created out of distilled experience.
• Common biases and errors in decision making
  • @@Overconfidence bias@@: overconfident about our abilities and the abilities of others, usually unaware of it.
  • @@Anchoring bias@@: tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information.
  • @@Confirmation bias@@: tendency to seek out information that reaffirms past choices and to discount information that contradicts past judgements.
  • @@Availability bias@@: tendency for people to base their judgements on information that is readily available to them.
  • @@Escalation of commitment@@: increased commitment to a previous decision in spite of negative information.
  • @@Randomness error@@: tendency of individuals to believe that they can predict the outcome of random events.
  • @@Risk aversion@@: tendency to prefer a sure gain of a moderate amount over a riskier outcome might have a higher expected payoff.
  • @@Hindsight bias@@: tendency to believe falsely, after an outcome of an event is actually known, that one would have accurately predicted the outcome.

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Influences on decision making: individual differences and organizational constraints

• Individual differences
  • Personality → personality influences our decisions.
  • Gender → women tend to spend more time than men analyzing decisions.
  • Mental ability → people with higher levels of mental ability are able to process information more quickly and solve problems more accurately.
  • Cultural differences → cultural background can definitely influence the way a decision is being made like in the selection of problems, depth of the analysis, etc.
• Organization constraints
  • Performance evaluation → managers are strongly influenced in their decision making by the criteria on which they are evaluated.
  • Reward systems influences decision makers by suggesting to them what choices are preferable in terms of personal payoff.
  • Formal regulations → rules that are set and need to be followed are definitely a constraint in the decisions that can or can not be taken.
  • System-imposed time constraints → decisions are often imposed with deadlines, they need to be made before a certain date.
  • Historical precedents → choices made today are therefore a result of choices made over the years.

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What about ethics in decision making?

• 3 ethical decision criteria
  • @@Utilitarian criterion@@: system in which decisions are made to provide the greatest good for the greatest number.
  • @@Rights criterion@@: individuals to make decisions consistent with fundamental liberties and privileges, respecting and protecting basic rights of every individual.
  • Whistle-blowers: individuals who report unethical practices by their employer to outsiders.
  • @@Justice criterion@@: impose and enforce rules fairly and impartially so that there is an equitable distribution of benefits and costs.
  • Behavioral ethics: analyzing how people actually behave when confronted with ethical dilemmas.

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Creativity, decision making and innovation in organizations

• @@Creativity@@: ability to produce novel and useful ideas.

• @@Three-stage model of creativity@@: proposition that involves three stages: causes (creative potential and creative environment), creative behavior and creative outcomes (innovation).

  • Creative behavior
  • Problem formulation: state of creative behavior which involved identifying problem or opportunity that requires a solution that is as yet unknown.
  • Information gathering: state when possible solutions to a problem incubate in individuals mind.
  • Idea generation: process of creative behavior that involves developing possible solutions to a problem from relevant information and knowledge.
  • Idea evaluation: process of creative behavior involving the evaluation of potential solutions to problems to identify the best one.
  • Causes of creative behavior
  • Creative potential: intelligence is related to creative behavior, expertise is the foundation of all creative work.
  • Creative environment: potential is not enough, you need to be in an environment where creative potential can be realized.
  • Creative outcomes (innovation): ideas or solutions judged to be novel and useful by relevant stakeholders.

  

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