Manual The Truth About Using Facts AND Intuition in Decision Making (FT Press Delivers Elements)

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  1. Making decisions
  2. (PDF) Chapter 6. Perception and Individual Decision Making | EA Mendoza -
  3. General Systems Theory
  4. 1. The Development of Editorial Analytics
  5. Learning outcomes

Selective perception allows us to speed-read others, but not without the risk of drawing an inaccurate picture. Seeing what we want to see, we can draw unwarranted conclusions from an ambiguous situation. We find another example of selective perception in financial analysis. From to , the U. Although there are several reasons analysts are reluctant to put sell ratings on stocks, one is selective perception. When prices are going down, analysts often attend to the past saying the stock is a bargain relative to its prior price , rather than the future the downward trend may well continue.

Chinese Time, North American Time W e realize just how much we Even the way we visualize the pas- relevant , whereas North Americans take our perceptions of the sage of time differs across cultures. Further research will have one who grew up in a culture totally University examined how American to examine whether this is the case, different from our own. English speakers and Mandarin but it remains an interesting possibility. For instance, people see the pas- Chinese speakers differed in their sage of time quite differently in different perception of time. Because English Sources: L.

Ji, Z. Zhang, and D.

Messervey, cultures. Boroditsky, O. Participants Mandarin however uses words like and K. Shipp, J. Edwards, the distant past, recent past, or present. Could this difference in language struc- and L. Do Chinese think Human Decision Processes , no.

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The reality of the halo effect was confirmed in a classic study in which sub- jects were given a list of traits such as intelligent, skillful, practical, industrious, determined, and warm and asked to evaluate the person to whom those traits applied. Clearly, the subjects were allowing a sin- gle trait to influence their overall impression of the person they were judging. This example demonstrates how a contrast effect can distort perceptions. Our reaction is influenced by other persons we have recently encountered.

A candidate is likely to receive a more favorable evaluation if preceded by mediocre applicants and a less favorable evaluation if preceded by strong applicants. Stereotyping When we judge someone on the basis of our perception of the group to which he or she belongs, we are using the shortcut called stereotyping. For example, it does make sense to assume that Tre, the new employee from accounting, is going to know something about budgeting, or that Allie from finance will be able to help you figure out a forecasting problem. The problem occurs, of course, when we generalize inaccurately or too much.

Making decisions

But women in America and European, Eastern European, Asian, and Latin American countries report that gender stereotyping makes it difficult for them to enter the profession because it is largely regarded as a job strictly for men. But women who want to do police work con- tend that they satisfy the fitness requirements and even bring special qualities to the job such as compas- sion and good communication skills.

Person Perception: Making Judgments About Others One problem of stereotypes is that they are widespread and often useful generalizations, though they may not contain a shred of truth when applied to a particular person or situation. We evaluate how much effort our co-workers are putting into their jobs. In many cases, our judgments have important consequences for the organization. Employment Interview Few people are hired without an interview. But interviewers make perceptual judgments that are often inaccurate20 and draw early impressions that quickly become entrenched.

Research shows we form impressions of others within a tenth of a second, based on our first glance. Performance Expectations People attempt to validate their perceptions of reality even when these are faulty. Expectations become reality. The self-fulfilling prophecy has been found to affect the performance of students, soldiers, and even accountants.

Although the appraisal can be objective for example, a sales-person is appraised on how many dollars of sales he generates in his territory , many jobs are evaluated in subjective terms.

(PDF) Chapter 6. Perception and Individual Decision Making | EA Mendoza -

Ironically, sometimes performance ratings say as much about the evaluator as they do about the employee! Middle- and lower-level managers set production sched- ules, select new employees, and decide how to allocate pay raises. Organizations have begun empowering their nonmanage- rial employees with decision-making authority historically reserved for managers MyManagementLab alone. Individual decision making is thus an important part of organizational For an interactive application of this behavior.

If your car breaks down and you rely on it to get to work, you have a problem that requires a decision on your part. In contrast, her counterpart in another division, who also had a 2 percent sales decrease, might consider that quite acceptable. So awareness that a problem exists and that a decision might or might not be needed is a perceptual issue.

Every decision requires us to interpret and evaluate information. We typically receive data from multiple sources and need to screen, process, and interpret them. Which data are relevant to the decision, and which are not? Our perceptions will answer that question. We also need to develop alter- natives and evaluate their strengths and weaknesses.

Again, our perceptual Delta Airlines management made a decision in reaction to the problem of negative publicity resulting from a growing number of customer complaints about poor service. Today, Delta has about Red Coats who walk around airports and use hand- held devices to give one-on-one, on-the-spot help to customers in everything ranging from printing boarding passes to directing passen- gers to the right concourse. Decision Making in Organizations process will affect the final outcome.


Finally, throughout the entire decision- making process, perceptual distortions often surface that can bias analysis and conclusions. Decision Making in Organizations 5 Apply the rational model Business schools generally train students to follow rational decision-making models. This is where OB enters the picture: to improve contrast it with bounded the way we make decisions in organizations, we must understand the decision- rationality and intuition.

Next we describe these errors, beginning with a brief overview of the rational decision-making model.

General Systems Theory

The Rational Model, Bounded Rationality, and Intuition Rational Decision Making We often think the best decision maker is rational and makes consistent, value-maximizing choices within specified constraints. The rational decision-making model relies on a number of assumptions, including that the decision maker has complete information, is able to iden- tify all the relevant options in an unbiased manner, and chooses the option with the highest utility.

People are usually content to find an acceptable or reasonable solution to a problem rather than an optimal one. Choices tend to be limited to the neighborhood of the problem symptom and the current alternative. Define the problem. Identify the decision criteria. Allocate weights to the criteria.

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Develop the alternatives. Evaluate the alternatives. Select the best alternative. So people satisfice; they seek solutions that are satisfactory and sufficient. When you considered which college to attend, did you look at every viable alternative?

1. The Development of Editorial Analytics

Did you carefully identify all the criteria that were important in your decision? Did you evaluate each alternative against the criteria in order to find the optimal college? Few people made their college choice this way. Instead of optimizing, you probably satisficed. Because the human mind cannot formulate and solve complex problems with full rationality, we operate within the confines of bounded rationality. We construct simplified models that extract the essential features from problems without capturing all their complexity.

How does bounded rationality work for the typical individual? But the criteria are unlikely to be exhaustive. We identify choices that are easy to find and highly visible and that usually represent familiar criteria and tried-and- true solutions. That ends our search. So the solution represents a satisficing choice—the first acceptable one we encounter—rather than an optimal one.

Satisficing is not always a bad idea—a simple process may frequently be more sensible than the traditional rational decision-making model. All these processes can cost time, energy, Top managers of Nike, Inc. And if there are many unknown weights and preferences, the fully rational model may not be any more accurate than a best guess.

Sometimes a fast-and-frugal process of solving problems might be your best option. Returning to your college choice, would it really be smarter to fly around the country to visit dozens of potential campuses, paying application fees for all these options? It might be much smarter to find a few colleges that match most of your preferences and then focus your attention on differentiating between those.

Intuition Perhaps the least rational way of making decisions is intuitive decision making, an unconscious process created from distilled experience. Nor does it always contradict rational analysis; rather, the two can complement each other.

Learning outcomes

But nor is intuition superstition, or the product of some magical or paranormal sixth sense. The key is neither to abandon nor rely solely on intuition, but to supplement it with evidence and good judgment. Common Biases and Errors in Decision Making 6 List and explain the Decision makers engage in bounded rationality, but they also allow systematic biases and errors to creep into their judgments. These shortcuts can be helpful. However, they can also distort rationality. Following are the most common biases in decision making. Exhibit provides some suggestions for how to avoid falling into these biases and errors.

Clear goals make decision making easier and help you eliminate options that are inconsistent with your interests. 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.