Chapter 6:
Perception & Individual Decision Making
Perception
What is Perception?
• Perception is a process by which individuals organize and interpret
their sensory impressions in order to give meaning to their
environment. It's how we see, hear, smell, taste, and feel the world
around us — but more than just sensing, perception involves organizing
and making sense of those sensations in the brain.
• What we perceive can be substantially different from objective reality.
• Example: Imagine two employees, Alice and Bob, who work in the same
department. Alice is very outgoing, talks a lot in meetings, and always
seems busy. Bob is quiet, works steadily, and doesn’t draw much
attention to himself. Their manager perceives Alice as the better
performer because she is more visible and vocal. However, objective
performance data (like completed projects, accuracy, and client
feedback) shows that Bob actually performs better—he gets more done
with fewer errors and consistently meets deadlines.
Why is Perception Important in the Study of OB?
1. Perception influences individual behavior: People act based on their perceptions,
not necessarily on objective reality. Two employees may perceive the same
situation differently and respond in completely different ways.
2. It affects decision-making: Managers and employees make judgments about
others, problems, and situations based on what they perceive, which shapes how
decisions are made — such as hiring, promotions, and conflict resolution.
3. It impacts communication: Perception affects how messages are interpreted and
understood. Misperceptions can lead to misunderstandings, confusion, or even
conflict in teams.
4. It shapes attitudes and motivation: How employees perceive fairness, recognition,
or leadership directly affects their job satisfaction, engagement, and motivation
levels.
5. It influences leadership: Leaders need to be aware of how they are perceived by
others and how they perceive their team members. Misjudging talent or
misreading team dynamics can result in poor leadership decisions.
6. It drives organizational culture: The shared perceptions of employees — about
trust, transparency, inclusion, etc. — form the basis of the organizational culture.
Factors that Influence Perception
There are many factors that influence how something is
perceived. These factors can reside in the perceiver, in the
object or target being perceived, or in the context of the
situation in which the perception is made.
1. Factors pertaining to the perceiver: The person’s
attitudes, motives, interests, experience and expectations.
2. Factors related to the actual target: Novelty, motion,
sounds, size, background, proximity and similarity.
3. Factors associated with the context: Time, work setting
and social setting.
…Factors that Influence Perception
Attribution Theory
Attribution theory attempts to explain the world and to
determine the cause of an event or behavior.
• It is an attempt to determine whether an individual’s
behavior is internally or externally caused (Internally caused
behaviors are those we believe to be under the personal
control of the individual. Externally caused behavior is what
we imagine the situation forced the individual to do).
• Example: If one employee is late for work, manager might
attribute that to his partying into the wee hours and then
oversleeping. This is an internal attribution. But if manager
attribute lateness to an automobile accident that tied up
traffic, he is making an external attribution.
…Attribution Theory
Key Elements of Attribution Theory: When we observe an individual’s
behavior, we attempt to determine whether it was internally or externally
caused. That determination depends largely on three factors:
1. Distinctiveness: Distinctiveness refers to whether an individual displays
different behaviors in different situations. Is the employee who arrives
late today also one who regularly “blows off” commitments? What we
want to know is whether this behavior is unusual. If it is, we are likely to
give it an external attribution.
2. Consensus: If everyone who faces a similar situation responds in the same
way, we can say the behavior shows consensus. If consensus is high, you
would probably give an external attribution.
3. Consistency: Responds in the same way over time. The more consistent
the behavior, the more we are inclined to attribute it to internal causes.
…Attribution Theory
Errors and Biases in Attribution
• 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. Example: If a coworker
misses a deadline, you might think:
“They’re lazy or irresponsible” (internal attribution)
“Maybe they were overloaded with work or had a personal emergency”
(external attribution)
• Self-Serving Bias: The tendency for individuals to attribute their own
successes to internal factors and put the blame for failures on external
factors. Example:
After a successful presentation: “I did great because I’m a strong
communicator”
After a failed presentation: “It went poorly because the projector broke
and the audience was tough”
Common Shortcuts in Judging Others
There are various types of errors or short-cut methods which are frequently used by
the individuals while observing others in our day-to-day life due to faulty perceptual
process and make a wrong decision.
1. Selective Perception: Selective perception is a process by which one only perceives what
he feels is right, completely ignoring the opposing viewpoints. Example: You are told
smoking is a bad habit, and before you even know a person, you label him as bad,
because he smokes.
2. Halo and Horns Effect: Halo effect is the tendency to draw a positive general
impression about an individual based on a single characteristic. The horns effect, on the
other hand, is the tendency to draw a negative general impression about an individual
based on a single characteristic.
3. Contrast Effect: The contrast effect happens when someone is judged not on their own
performance or traits, but based on how they compare to others around them —
especially those just seen or evaluated.
4. Stereotyping: Judging someone on the basis of one’s perception of the group to which
that person belongs. Example: ‘All Blacks are good at sports’ / ‘Girls are not good at
sports’ / ‘All Arabs and Muslims are terrorists’.
Methods to Overcome Biases in Perception
The pitfalls listed above can be minimized by enhancing
perceptual skills by consciously putting effort in the following
activities:
1. Knowing and perceiving oneself accurately
2. Being empathic
3. Having positive attitudes
4. Enhancing one’s self-concept
5. Making a conscious effort to avoid the possible common biases
in perception
6. Open communication
7. Avoiding attributions
Specific Applications of Shortcuts in Organizations
1. Employment Interview: Interviewers generally draw early impressions
that are often inaccurate. In addition, different interviewers see different
things in the same candidate and thus arrive at different conclusions
about the applicant. Research shows most interviewer’s decisions change
very little after first 4 or 5 minutes of the interview. We form
impressions of others within a tenth of a second, based on our first
glance.
2. Performance Expectations: The desired expectations of a person from
others.
i. Pygmalion effect: Higher expectations leads to increase in performance.
ii. Golem effect: Lower expectations leads to decrease in performance.
3. Performance Evaluations: During the performance appraisal, the
managers are subjected to have influenced by various perceptual errors
particularly, halo effect, stereotyping, contrast effect etc. Though
subjective evaluation is necessary but is problematic as well.
Decision Making
Decision making is the process of identifying and
choosing the best possible course of action from
among several alternatives, based on values,
preferences, and available information.
• In Organizational Behavior, decision making is
critical because it affects everything from
daily operations to long-term strategy,
impacting performance, leadership, and team
dynamics.
Models of Decision Making
All decisions can be categorized into the following three basic models:
1. The Rational Model: It is a step-by-step process people use to make logical, well-
thought-out decisions.
Assumptions: (i) The problem is clear, (ii) The decision-maker can identify all
relevant criteria and viable alternatives, (iii) The criteria and alternatives can be
ranked and weighted, (iv) Specific decision criteria are constant and that the
weights assigned to them are stable over time, (v) Full information is available
because there are no time or cost constraints, (vi) The choice alternative will yield
the highest perceived value.
Steps: (i) Define the problem, (ii) Identify the decision criteria, (iii) Allocate
weights to the criteria, (iv) Develop the alternatives, (v) Evaluate the alternatives,
(vi) Select the best alternative.
2. Bounded Rationality Model: This model acknowledges that people cannot process all
information or evaluate every option due to cognitive limits, time constraints, and
imperfect data.
3. Intuitive Model: Relies on gut feeling, instinct, or experience rather than structured
analysis.
Biases and Errors in Decision Making
1. Overconfidence Bias: Believing too much in our own ability to make good decisions.
Overestimate of performance and ability.
2. Anchoring Bias: The common human tendency to rely too heavily on the first piece of
information offered when making decisions.
3. Confirmation Bias: The tendency to seek out information that reaffirms past choices
and to discount information that contradicts past judgments.
4. Availability Bias: The tendency for people to base their judgments on information
that is readily available to them.
5. Escalation of Commitment: Escalation of commitment refers to staying with a
decision even when there is a clear evidence that it’s wrong.
6. Randomness Error: The tendency of individuals to believe that they can predict the
outcome of random events.
7. Risk Aversion: The tendency to prefer a sure gain of a moderate amount over a
riskier outcome, even if the riskier outcome might have a higher expected payoff.
8. Hindsight Bias: The tendency people have to view events as more predictable than
they really are. After an event, people often believe that they knew the outcome of
the event before it actually happened.
Reducing Biases and Errors
1. Focus on Goals: Clear goals make decision making easier and help you
eliminate options that are inconsistent with your interests.
2. Look for Information That Disconfirms Your Beliefs: One of the most
effective means for counteracting overconfidence and the confirmation
and hindsight biases is to actively look for information that
contradicts your beliefs and assumptions.
3. Don’t Try to Create Meaning out of Random Events: Ask yourself if
patterns can be meaningfully explained or whether they are merely
coincidence. Don’t attempt to create meaning out of coincidence.
4. Increase Your Options: The more alternatives you can generate, and
the more diverse those alternatives, the greater your chance of finding
an outstanding one.
Influences of Individual Differences on Decision Making
1. Personality: Indecisive people find it difficult to make
decisions, whereas Impulsive people make decisions
quickly without considering all the consequences.
2. Gender: Women spend much more time than men
analyzing the past, present, and future.
3. Mental ability: People with higher levels of mental
ability are able to make decisions quickly.
4. Cultural differences:
Decision making by Japanese
managers is much more group-oriented than in the United
States.
Influences of Organizational Constraints on Decision Making
1. Performance Evaluation: Managers are strongly influenced by the
criteria on which they are evaluated.
2. Reward Systems: If the organization rewards risk aversion, managers
are more likely to make conservative decisions.
3. Formal Regulations: Organizations create rules and policies to
program decisions and get individuals to act in the intended manner.
4. System-Imposed Time Constraints: Almost all important decisions
come with explicit deadlines which make it difficult for managers to
gather all the information they might like before making a final
choice.
5. Historical Precedents: Choices made today are largely a result of
choices made over the years.
THE END
