Organizational Behavior

Lecture#8

Instructor:
Muhammad Irfan Bajwa

Perception & Individual Decision Making

Review:
What is Perception?
The Attribution Theory
Shortcuts used in making judgments about others
The link between Perception & Individual Decision
Making
Decision Making in organizations

Perception & Individual Decision Making

Critical knowledge components:

Common Biases and Errors in Decision Making
Influences on Decision Making: Individual Differences
and Organizational Constraints
Ethics in Decision Making
Creativity in Decision Making

Perception & Individual Decision Making

Common Biases and Errors in Decision Making
Overconfidence Bias
Believing too much in our own ability to make good decision.
Research shows that when we say that we are 100 percent
sure of something, we are actually 75 to 85 percent correct
People with weak intellectual skills are more overconfident

Anchoring Bias
A tendency to fixate on initial information, from which one
then fails to adequately adjust for subsequent information
Every time negotiation takes place, so does anchoring
e.g. Salary negotiations
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Perception & Individual Decision Making

Common Biases and Errors in Decision Making
Confirmation Bias
The tendency to seek out information that reaffirms past
choices and to discount information that contradicts past
judgments
It is a case of selective perception

Availability Bias
The tendency for people to base their judgments on
information that is readily available to them
e.g. Risk of accident in Airplane Vs Car
e.g. Employees performance evaluation is largely affected by
his recent achievement than the achievements 6 or 9 months
ago
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Perception & Individual Decision Making

Common Biases and Errors in Decision Making
Escalation of Commitment
An increased commitment to a previous decision in spite of
negative information
This is throwing good money after bad
e.g. Blackberry Storm

Randomness Error
The tendency of individuals to believe that they can predict
the outcome of random events
It happens when we turn imaginary patterns into
superstitions
e.g. Number 13, Red Shirt of Tiger woods
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Perception & Individual Decision Making

Common Biases and Errors in Decision Making
Winners Curse
A decision making dictum which argues that the winning
participants in an auction typically pay too much for the
winning item
Highest bidder is the one who overestimates the most

Hindsight Bias
The tendency to believe falsely, after an outcome of an event
is actually known, that one would have accurately predicted
the outcome
e.g. Could 9/11 have been prevented?

Perception & Individual Decision Making

Influences on Decision Making: Individual
Differences and Organizational Constraints
Individual Differences
Personality
People with high self esteem are more affected by Self-serving bias
Achievement-striving people are more likely to escalate their
commitments

Gender
Women analyze the decisions more than men do
Trade offs?

Perception & Individual Decision Making

Influences on Decision Making: Individual
Differences and Organizational Constraints
Organizational Constraints

Performance Evaluation
Reward System
Formal Regulations
System Imposed Time Constraints
Historical Precedents

Perception & Individual Decision Making

Ethics in Decision Making
Three Ethical Decision Criteria
Utilitarianism
A system in which decisions are made to provide the greatest good for
the greatest number

Rights
A system in which decisions are based on the fundamental liberties
and privileges
Case of whistle-blowers

Justice
A system in which decisions are made by imposing the rules fairly and
impartially so that there is an equitable distribution of benefits and
costs

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Perception & Individual Decision Making

Creativity in Decision Making
Three-Component Model of Creativity
Expertise
Abilities, knowledge, skills, proficiencies

Creativity Skills
Intellectual skills, problem solving skills, abilities to use analogies

Task Motivation
Desire to work on something
Because the task is interesting, involving, exciting, satisfying

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