Individual

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Individual Group Decision Making

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• mcja 602-95

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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.

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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

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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

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How decisions are actually made...

• most decisions dont result from the rational dm
  model.
• Issues
• bounded rationality
• intuition
• problem identification
• making choices

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Bounded Rationality

• limited capability of information processing
• simplify complex problems
• choose first solution that is good enough (I.e.
  satisfactory and sufficient).

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Making Choices

• Sources of bias
• heuristics (judgmental shortcuts)
• availability (information readily available)
• representatives (analogies between a current
  issue and a previous one).

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Organizational Constraints

• People constrain their decisions to reflect
• performance evaluation system
• reward system
• programmed routines
• time constraints
• historical precedent

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Cultural Differences

• Americans
• time orientation
• time is a resource
• creation of deadlines
• creation of timelines

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Perception and Individual Decision Making
LEARNING OBJECTIVES

• 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.

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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.

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Exhibit 3 - 2Factors that Influence Perception
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Factors Influencing Perception

• The Perceiver
• The Target
• The Situation

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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 peoples 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.

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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 persons characteristics that
  are affected by comparisons with other people
  recently encountered who rank higher or lower on
  the same characteristics.
• Projection
• Attributing ones own characteristics to other
  people
• Stereotyping
• Judging someone on the basis of ones perception
  of the group to which that person belongs.

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Exhibit 3 - 3Attribution Theory
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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.

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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.

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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-Makers best interest to address
  problems of high visibility and high payoff.
  This demonstrates an ability to perceive and
  attack problems.

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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.

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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.

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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.

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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.

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Exhibit 3-6Decision-Style Model
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Organizational Constraints

• Performance Evaluations
• Reward Systems
• Programmed Routines
• System-Imposed Time Constraints
• Historical Precedents

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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.

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Exhibit 3-7Factors Affecting Ethical
Decision-Making Behavior
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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 individuals 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.
• Dont assume that your specific decision style is
  appropriate for every job.
• Use creativity-stimulation techniques.