Shreemati Nathibai Damodar

Thackersey
Women's University

UNDERSTANDING THE CONCEPT OF

PERCEPTION AND DECISION MAKING
Organizational Behavior (Assignment)
Mary Evarika Marbaniang
Roll No: 10

UNDERSTANDING THE CONCEPT OF PERCEPTION AND

DECISION MAKING
- By: Mary Evarika Marbaniang

PERCEPTION
Perception is a process
by which individuals
organize and interpret
their
sensory
impressions in order to
give meaning to their
environment. However,
what one perceives can
be substantially different from objective reality. There need not be, but there is often, disagreement.
For example, its possible that all employees in a firm may view it as a great place to workfavorable
working conditions, interesting job assignments, good pay, excellent benefits, an understanding and
responsible managementbut, as most of us know, its very unusual to find such agreement. Why is
perception important in the study of OB? Simply because peoples behavior is based on their
perception of what reality is, not on reality itself. The world as it is perceived is the world that is
behaviorally important.

A number of factors operate to shape and sometimes distort perception. 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.
When an individual looks at a target and attempts to interpret what he or she sees, that interpretation is
heavily influenced by the personal characteristics of the individual perceiver. Personal characteristics
that affect perception include a persons attitudes, personality, motives, interests, past experiences, and
expectations. For instance, if you expect police officers to be authoritative, young people to be lazy, or
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individuals holding public office to be unscrupulous, you may perceive them as such regardless of
their actual traits.
Characteristics of the target being observed can affect what is perceived. Loud people are more likely
to be noticed in a group than quiet ones. So, too, are extremely attractive or unattractive individuals.
Because targets are not looked at in isolation, the relationship of a target to its background also
influences perception, as does our tendency to group close things and similar things together. For
instance, women, people of color, or members of any other group that has clearly distinguishable
characteristics in terms of features or color are often perceived as alike in other, unrelated
characteristics as well.
The context in which we see objects or events is also important. The time at which an object or event
is seen can influence attention, as can location, light, heat, or any number of situational factors. For
example, at a nightclub on Saturday night, you may not notice a 22-year-old female dressed to the
nines. Yet that same woman so attired for your Monday morning management class would certainly
catch your attention (and that of the rest of the class). Neither the perceiver nor the target changed
between Saturday night and Monday morning, but the situation is different.
Our perceptions of people differ from our perceptions of inanimate objects such as desks, machines,
or buildings because we make inferences about the actions of people that we dont make about
inanimate objects. Nonliving objects are subject to the laws of nature, but they have no beliefs,
motives, or intentions. People do. The result is that when we observe people, we attempt to develop
explanations of why they behave in certain ways. Our perception and judgment of a persons actions,
therefore, will be significantly influenced by the assumptions we make about that persons internal
state.
Attribution theory has been proposed to develop explanations of the ways in which we judge people
differently, depending on what meaning we attribute to a given behavior.2 Basically, the theory
suggests that when we observe an individuals behavior, we attempt to determine whether it was
internally or externally caused. That determination, however, depends largely on three factors: (1)
distinctiveness, (2) consensus, and (3) consistency.
First, lets clarify the differences between internal and external causation and then well elaborate on
each of the three determining factors. Internally caused behaviors are those that are believed to be
under the personal control of the individual. Externally caused behavior is seen as resulting from
outside causes; that is, the person is seen as having been forced into the behavior by the situation. For
example, if one of your employees is late for work, you might attribute his lateness to his partying into
the week hours of the morning and the oversleeping. This would be an internal attribution. But if you
attribute his arriving late to an automobile accident that tied up traffic on the road that this employee
regularly uses, then you would be making an external attribution.

If everyone who faces a similar situation responds in the same way, we can say the behavior shows
consensus. The behavior of the employee discussed above would meet this criterion if all employees
who took the same route to work were also late. From an attribution perspective, if consensus is high,
you would be expected to give an external attribution to the employees tardiness, whereas if other
employees who took the same route made it to work on time, your conclusion as to causation would
be internal. Finally, an observer looks for consistency in a persons actions. Does the person respond
the same way over time? Coming in 10 minutes late for work is not perceived in the same way for the
employee for whom it is an unusual case (she hasnt been late for several months) as it is for the
employee for whom it is part of a routine pattern (she is late two or three times a week). The more
consistent the behavior, the more the observer is inclined to attribute it to internal causes.
One of the more interesting findings from attribution theory is that there are errors or biases that
distort attributions. For instance, there is substantial evidence that when we make judgments about the
behavior of other people, we have a tendency to underestimate the influence of external factors and
overestimate the influence of internal or personal factors. This is called the fundamental attribution
error and can explain why a sales manager is prone to attribute the poor performance of her sales
agents to laziness rather than to the innovative product line introduced by a competitor. There is also a
tendency for individuals and organizations to attribute their own successes to internal factors such as
ability or effort while putting the blame for failure on external factors such as bad luck or
unproductive coworkers. This is called the self-serving bias. For example, when the Iraq war appeared
to go well, the White House declared Mission Accomplished. But when it became clear that the
weapons of mass destruction (WMD) were nowhere to be found and that the fighting was far from
over, the White House rushed to blame intelligence failures.

Factors that influence perception

Because peoples behavior is based on their perception of what reality is, not on reality itself, it is
possible that two persons can see the same thing and interpret it differently.
Based on the above, the following are some factors that affect perception and hence, it affects decision
making process:
1.Selective Perception: people selectively interpret what they see on the basis of their interest,
background, experience, and attitudes. This factor allow people to speed-read others but not without
the risk of drawing an in accurate picture. Hence, peoples decision will be impaired by wrong
perception.
2.Halo (Horns) Effect: people are drawing a general impression about an individual on the basis of a
single characteristic. This will negatively affect their decisions.
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3.Contrast Effects: it is evaluations of a persons characteristics that are affected by comparisons with
other people recently encountered who rank higher or lower on the same characteristics. This factor
also affects decisions quality.
4.Stereotyping: it is judging someone on the basis of ones perception of the group to which that
person belongs. People rely on generalizations every day because they help them make decisions
quickly. They are a means of simplifying a complex world. This will affect decision making process.
5.Rationality: people are usually content to find an acceptable or reasonable solution to a problem
rather than an optimal one. The process of making decisions using rationality rather than a defined
prescriptive model in not effective enough in taking the best decision.
6.Bounded Rationality: individuals make decisions by constructing simplified models that extract the
essential features from problems without capturing all their complexity. So, people seek decisions that
are satisfactory and sufficient. They tend to choose the first acceptable solution encountered rather
than the optimal one. This may not ensure the best decisions.
7.Intuitive Decision Making: intuition is often used when there is a high level of uncertainty, there is
little precedent to go on, when the variable in question are less predictable, when facts are limited,
these facts dont lead you in one particular direction, data is of little use, when there are several
plausible choices, and there is time pressure. It may be used in decision making process when all
given factors are ambiguous.
8.Overconfidence Bias: we tend to be overly optimistic especially when our intellect and
interpersonal abilities are low. This wrong perception will lead to wrong decisions.
9.Anchoring Bias: it is the tendency to focus on initial information as a starting point. This occurs
because our mind appears to a disproportionate amount of emphasis to the first information it
receives. This results in not to take the optimal decisions.
10.Confirmation Bias: we tend to selectively seek out information that reaffirms our past choices and
we discount information that contradicts our past judgments. This could happen even if we are not
sure that this is the optimal choice.
11.Availability Bias: the tendency of people to base their judgments on information readily available
to them whatever this information is enough to make the best decisions or not.
12.Representative Bias: the tendency to assess the likelihood of an occurrence by drawing analogies
and seeing identical situations in which they dont exist. This will lead to make the decisions on a very
weak base.
13.Escalation of Commitment: an increased commitment to a previous decision in spite of negative
information which is often creeps into decision making process.
14.Randomness Error: we tend to create meaning out of random events which is not enough to
ensure the optimal decision making process.

15.Hindsight Bias: we tend to believe falsely that we would have accurately predicted the outcome of
an event, after that outcome is actually known. This will confirm the situation even if we believe that
it was a wrong decision.
16.Personality: many personal characters like conscientiousness and self-esteem may affect
perception and hence, affect decision making process.
17.Gender: women tend to analyze decisions more than men. Women tend to analyze a decision prior
to and after the fact. This difference in length of thinking in problems will lead to more accuracy in
making decisions as well as much time consumed for taking a decision by women.
18.Cultural Differences: there are differences in what problems to focus on, the depth of analysis,
importance of logic and rationality, and preference for individual vs. group decision making.
Practical examples clarifying perception effects on decision making:
1.Employment interview: Early impressions are very effective and important. Perceptual judgments
are often inaccurate and may lead to inaccurate decisions in selecting candidates to be hired.
2.Performance Expectations: People attempt to validate their perceptions of reality, even when they
are faulty. A 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. This
will lead to misunderstanding in actual intensions of the two persons and hinder their communication.
3.Performance Evaluations: many subjective components (perceptions) are used in the evaluation of
employees. This will affect decisions taken in performance appraisal procedures in organizations.
4.Employee Effort: how is effort perceived is often a reason for terminations. Managers may tend to
perceive the effort of their employees is not enough as they expect. This is depending on the
managers perceptions.
5. Ethnic Profiling: Form of stereotyping in which a group of individuals is singled out on the basis
of race or ethnicity.
DECISION MAKING: THE LINK BETWEEN PERCEPTION AND INDIVIDUAL
DECISION MAKING

Individuals in organizations make decisions. That is, they make choices from among two or more
alternatives. Top managers, for instance, determine their organizations goals, what products or
services to offer, how best to finance operations, or where to locate a new manufacturing plant.
Middle and lower-level managers determine production schedules, select new employees, and decide
how pay raises are to be allocated. Of course, making decisions is not the sole province of managers.
Non-managerial employees also make decisions that affect their jobs and the organizations for which
they work. The more obvious of these decision might include whether or not to come to work on any
given day, how much effort to put forth once at work, and whether or not to comply with a request
made by the boss. In addition, an increasing number of organizations in recent years have been
empowering their non managerial employees with job-related decision making authority that
historically was reserved for managers. Individual decision making, therefore, is an important, part of
organizational behavior. But how individuals in organizations make decisions and the quality of their
final choices are largely influenced by their perceptions.
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Decision making occurs as a reaction to a problem. That is, there is a discrepancy between some
current state of affairs and some desired state, requiring the consideration of alternative courses of
action. So if your car breaks down and you rely on it to get to work, you have a problem that requires
a decision on our part. Unfortunately problems don't come neatly packaged with a label problem
clearly displayed on them. One persons problem is another persons satisfactory state of affairs. One
manager may view her divisions two percent decline in quarterly sales to be a serious problem
requiring immediate action on her part. In contrast, her counterpart in another division of the same
company, who also had a two percent sales decrease, may consider that percentage quite acceptable.
So the awareness that a problem exists and that a decision needs to be made is a perceptual issue.
Moreover, every decision requires the interpretation and evaluation of information. Data are typically
received from multiple sources, and they need to be screened, processed, and interpreted. Which data,
for instances, are relevant to the decision and which are not? The perceptions of decision maker will
answer that question. Alternatives will be developed, and the strengths and weakness of each will
need to be evaluated. Again, because alternatives dont come with red flags? identifying them as such
or with their strengths and weakness clearly marked, the individual decision makers perceptual
process will have a large bearing on the final outcome. Finally, throughout the entire decision process,
perceptual distortions often surface that have the potential to bias analysis and conclusions.
Every day, people are inundated with decisions, big and small. Understanding how people arrive at
their choices is an area of cognitive psychology that has received attention. Theories have been
generated to explain how people make decisions, and what types of factors influence decision making
in the present and future. In addition, heuristics have been researched to understand the decision
making process.

Factors that Influence

Decision Making
There
are
several
important factors that
influence
decision
making.
Significant
factors include past
experiences, a variety of
cognitive biases, an
escalation
of
commitment and sunk
outcomes, individual differences, including age and socioeconomic status, and a belief in personal
relevance. These things all impact the decision making process and the decisions made.
People make decisions about many things. They make political decisions; personal decisions,
including medical choices, romantic decisions, and career decisions; and financial decisions, which
may also include some of the other kinds of decisions and judgments. Quite often, the decision
making process is fairly specific to the decision being made. Some choices are simple and seem
straight forward, while others are complex and require a multi-step approach to making the decisions.

Past experiences can impact future decision making. Juliusson, Karlsson, and Garling (2005)
indicated past decisions influence the decisions people make in the future. It stands to reason that
when something positive results from a decision, people are more likely to decide in a similar way,
given a similar situation. On the other hand, people tend to avoid repeating past mistakes (Sagi, &
Friedland, 2007). This is significant to the extent that future decisions made based on past experiences
are not necessarily the best decisions. In financial decision making, highly successful people do not
make investment decisions based on past sunk outcomes, rather by examining choices with no regard
for past experiences; this approach conflicts with what one may expect (Juliusson et al., 2005).
In addition to past experiences, there are several cognitive biases that influence decision making.
Cognitive biases are thinking patterns based on observations and generalizations that may lead to
memory errors, inaccurate judgments, and faulty logic (Evans, Barston, & Pollard, 1983; West,
Toplak, & Stanovich, 2008). Cognitive biases include, but are not limited to: belief bias, the over
dependence on prior knowledge in arriving at decisions; hindsight bias, people tend to readily explain
an event as inevitable, once it has happened; omission bias, generally, people have a propensity to
omit information perceived as risky; and confirmation bias, in which people observe what they expect
in observations (Marsh, & Hanlon, 2007; Nestler. & von Collani, 2008; Stanovich & West, 2008; see
also West et al., 2008).
In decision making, cognitive biases influence people by causing them to over rely or lend more
credence to expected observations and previous knowledge, while dismissing information or
observations that are perceived as uncertain, without looking at the bigger picture. While this
influence may lead to poor decisions sometimes, the cognitive biases enable individuals to make
efficient decisions with assistance of heuristics (Shah & Oppenheimer, 2008).
In addition to past experiences and cognitive biases, decision making may be influenced by an
escalation of commitment and sunk outcomes, which are unrecoverable costs. Juliusson, Karlsson,
and Garling (2005) concluded people make decisions based on an irrational escalation of
commitment, that is, individuals invest larger amounts of time, money, and effort into a decision to
which they feel committed; further, people will tend to continue to make risky decisions when they
feel responsible for the sunk costs, time, money, and effort spent on a project. As a result, decision
making may at times be influenced by how far in the hole the individual feels he or she is (Juliusson
et al., 2005).
Some individual differences may also influence decision making. Research has indicated that age,
socioeconomic status (SES), and cognitive abilities influences decision making (de Bruin, Parker, &
Fischoff, 2007; Finucane, Mertz, Slovic, & Schmidt, 2005). Finucane et al. established a significant
difference in decision making across age; that is, as cognitive functions decline as a result of age,
decision making performance may decline as well. In addition, older people may be more
overconfident regarding their ability to make decisions, which inhibits their ability to apply strategies
(de Bruin et al., 2007). Finally, with respect to age, there is evidence to support the notion that older
adults prefer fewer choices than younger adults (Reed, Mikels, & Simon, 2008).
Age is only one individual difference that influences decision making. According to de Bruin et al.
(2007), people in lower SES groups may have less access to education and resources, which may
make them more susceptible to experiencing negative life events, often beyond their control; as a
result, low SES individuals may make poorer decisions, based on past decisions.

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Over and above past experiences, cognitive biases, and individual differences; another influence on
decision making is the belief in personal relevance. When people believe what they decide matters,
they are more likely to make a decision. Acevedo and Krueger (2004) examined individuals voting
patterns, and concluded that people will vote more readily when they believe their opinion is
indicative of the attitudes of the general population, as well as when they have a regard for their own
importance in the outcomes. People vote when they believe their vote counts. Acevedo and Krueger
pointed out this voting phenomenon is ironic; when more people vote, the individual votes count less,
in electoral

Decision
Making
Heuristics
Heuristics
serve as a
framework in
which
satisfactory
decisions are
made quickly
and with ease
(Shah
&

Oppenheimer, 2008). Many types of heuristics have been developed to explain the decision making
process; essentially, individuals work to reduce the effort they need to expend in making decisions and
heuristics offer individuals a general guide to follow, thereby reducing the effort they must disburse.
Together, heuristics and factors influencing decision making are a significant aspect of critical
thinking (West, Toplak, & Stanovich, 2008). There is some indication that this can be taught, which
benefits those learning how to make appropriate and the best decisions in various situations (Nokes
&Hacker, 2007).
Heuristics are general decision making strategies people use that are based on little information, yet
very often correct; heuristics are mental short cuts that reduce the cognitive burden associated with
decision making (Shah & Oppenheimer, 2008). Shah and Oppenheimer argued that heuristics reduce
work in decision making in several ways. Heuristics offer the user the ability to scrutinize few signals
and/or alternative choices in decision making. In addition, heuristics diminish the work of retrieving
and storing information in memory; streamlining the decision making process by reducing the amount
of integrated information necessary in making the choice or passing judgment (Shah & Oppenheimer,
2008).
As a result of research and theorizing, cognitive psychologists have outlined a host of heuristics
people use in decision making. Heuristics range from general to very specific and serve various
functions. The price heuristic, in which people judge higher priced items to have higher quality than
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lower priced things, is specific to consumer patterns; while the outrage heuristic, in which people
consider how contemptible a crime is when deciding on the punishment (Shah, & Oppenheimer,
2008). According to Shah and Oppenheimer three important heuristics are the representative,
availability, and anchoring and adjustment heuristics.
In decision making, people rely on a host of heuristics for convenience and speed. One important
heuristic is the representative heuristic (RH), which is an extremely economical heuristics (Pachur, &
Hertwig, 2006). In the event that one of two things is recognizable, people will tend to choose the
recognized thing; utilizing or arriving at a decision with the least amount of effort or information
(Goldstein & Gigerenzer, 2002; Hilbig & Pohl, 2008). Hilbig and Pohl remarked that it is difficult to
research and answer definitively if an individual is using the RH alone, or if the person is using other
information in drawing a conclusion. As a result, the research on the RH is mixed (Goldstein &
Gigerenzer, 2002; see also Hilbig & Pohl, 2006). Goldstein and Gigerenzer provided seminal research
on the RH. They maintained recognition memory is perceptive, reliable, and more accurate than
chance alone; they argued less recognition leads to more correct decisions. On the other hand,
according to Hilbig and Pohl, people often use additional information when utilizing the RH; that is,
they do not rely solely on recognition along in decision making. Further, Hilbig and Pohl concluded
that even when sound recognition was established, people use additional information, in conjunction
with the RH.
Another highly researched heuristic is the availability heuristic. According to this heuristic, people
are inclined to retrieve information that is most readily available in making a decision (Redelmeier,
2005). Interestingly, this is an important heuristic, as it is the basis for many of our judgments and
decisions (McKelvie, 2000; Redelmeier, 2005). For example, when people are asked to read a list,
then identify names from the list, often, the names identified are names of famous individuals, with
which the participants are familiar (McKelvie, 2000). In the field of medicine, Redelmeier charged
that missed medical diagnoses are often attributable to heuristics, the availability heuristic being one
of those responsible. Redelmeier explained heuristics are beneficial as they are cognitively
economical, but cautioned clinicians and practitioners need to recognize when heuristics need to be
over-ridden in favor of more comprehensive decision making approaches.
The anchoring and adjustment heuristic is the foundational decision making heuristic in situations
where some estimate of value is needed (Epley, & Gilovich, 2006). In this particular heuristic,
individuals first use an anchor, or some ball park estimate that surfaces initially, and adjusts their
estimates until a satisfactory answer is reached. For example, if a person were asked to answer the
question, In what year did John F. Kennedy take office? the anchoring and adjustment heurist would
be used. The person may start with a known date, such as the date he was shot, November 22, 1963;
then make an estimate based on the known information (Epley, & Gilovich, 2006). The practical
application of the anchoring and adjustment heuristic is in negotiations; people make counter offers
based on the anchor that is provided to them. Epley and Gilovich explained often people tend to make
estimates which tend to gravitate towards the anchor side, where actual values tend to be farther away
from the anchor initially planted. Further, anchoring requires effort; such work is important in
avoiding anchor bias.
How Are Decisions Actually Made in Organizations?
Are decision makers in organizations rational? When decision makers are faced with a simple
problem having few alternative courses of action, and when the cost of searching out and evaluating
alternatives is low, the rational model is fairly accurate. Most decisions in the real world do not follow
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the rational model. Decision makers generally make limited use of their creativity. Choices tend to be
confined to the neighborhood of the problem symptom and to the neighborhood of the current
alternative.
A. Bounded Rationality: When faced with a complex problem, most people respond by reducing
the problem to a level at which it can be readily understood. This is because the limited
information-processing capability of human beings makes it impossible to assimilate and understand
all the information necessary to optimize. People satisfythey seek solutions that are satisfactory and
sufficient. Individuals operate within the confines of bounded rationality. They construct simplified
models that extract the essential features.
How does bounded rationality work?
Once a problem is identified, the search for criteria and alternatives begins. The decision maker will
identify a limited list made up of the more conspicuous choices, which are easy to find, tend to be
highly visible, and they will represent familiar criteria and previously tried-and-true solutions.
Once this limited set of alternatives is identified, the decision maker will begin reviewing it.
a. The decision maker will begin with alternatives that differ only in a relatively small degree from
the choice currently in effect.
b. The first alternative that meets the good enough criterion ends the search.
The order in which alternatives are considered is critical in determining which alternative is selected.
Assuming that a problem has more than one potential solution, the satisficing choice will be the first
acceptable one the decision maker encounters. Alternatives that depart the least from the status quo
are the most likely to be selected.
B. Common Biases and Errors: Decision makers allow systematic biases and errors to creep into
their judgments. People tend to rely on experience, impulses, gut feelings and rules of thumb. These
can lead to distortions.

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1. Overconfidence Bias: Individuals whose intellectual and interpersonal abilities are weakest are
most likely to overestimate their performance and ability. The more knowledgeable, the less likely to
display overconfidence.
2.Anchoring Bias: Fixating on initial information as a starting point and failing to adequately adjust
for subsequent information. Anchors are widely used by people in advertising, management, politics,
real estate, and lawyerswhere persuasion skills are important.
3.Confirmation Bias: Type of selective perception. Seek out information that reaffirms past choices,
and discount information that contradicts past judgments.
4.Availability Bias: Tendency for people to base judgments on information that is readily available.

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5.Representative Bias: Assess the likelihood of an occurrence by trying to match it with a preexisting
category.
6.Escalation of Commitment Error: Staying with a decision even when there is clear evidence that
its wrong.
7.Randomness Error: Decision making becomes impaired when we try to create meaning out of
random events.
8.Hindsight Bias: Tendency to believe falsely that one has accurately predicted the outcome of an
event, after that outcome is actually known.
C. Intuition: Intuitive decision-making has recently come out of the closet and into some
respectability. What is intuitive decision making? It is an unconscious process created out of distilled
experience. It operates in complement with rational analysis. Some consider it a form of extrasensory
power or sixth sense. Some believe it is a personality trait that a limited number of people are born
with.
Research on chess playing provides an excellent example of how intuition works. The experts
experience allows him or her to recognize the pattern in a situation and draw upon previously learned
information associated with that pattern to quickly arrive at a decision choice. The result is that the
intuitive decision maker can decide rapidly with what appears to be very limited information. Eight
conditions when people are most likely to use intuitive decision making:
a. when a high level of uncertainty exists
b. when there is little precedent to draw on
c. when variables are less scientifically predictable
d. when facts are limited
e. when facts do not clearly point the way to go
f.

when analytical data are of little use

g. when there are several plausible alternative solutions to choose from, with good arguments for
each
h. when time is limited, and there is pressure to come up with the right decision
Although intuitive decision making has gained in respectability, dont expect peopleespecially in
North America, Great Britain, and other cultures where rational analysis is the approved way of
making decisionsto acknowledge they are using it. Rational analysis is considered more socially
desirable in these cultures.
D. Individual Differences : Research on decision styles has identified four different individual
approaches to making decisions. People differ along two dimensions. The first is their way of
15

thinking. Some people are logical and rational. They process information serially. Some people are
intuitive and creative. They perceive things as a whole. The other dimension is a persons tolerance
for ambiguity Some people have a high need to minimize ambiguity. Others are able to process many
thoughts at the same time. These two dimensions, diagrammed, form four styles of decision making.
(See Exhibit 5-5.)
Directive:
a. Low tolerance for ambiguity and seek rationality
b. Efficient and logical
c. Decisions are made with minimal information and with few alternatives assessed.
d. Make decisions fast and focus on the short-run.
Analytic
a. Greater tolerance for ambiguity
b. Desire for more information and consideration of more alternatives
c. Best characterized as careful decision makers with the ability to adapt
Conceptual
a. Tend to be very broad in their outlook and consider many alternatives
b. Their focus is long range, and they are very good at finding creative solutions to problems.
Behavioral
a. Characterizes decision makers who work well with others
b. Concerned with the achievement of peers and subordinates and are receptive to suggestions from
others, relying heavily on meetings for communicating
c. Tries to avoid conflict and seeks acceptance
Most managers have characteristics that fall into more than one. It is best to think in terms of a
managers dominant style and his or her backup styles. Business students, lower-level managers, and
top executives tend to score highest in the analytic style. Focusing on decision styles can be useful for
helping you to understand how two equally intelligent people, with access to the same information,
can differ in the ways they approach decisions and the final choices they make.
E. Gender: Evidence indicates that women analyze decisions more than men. Rumination refers to
reflecting at length. In decision making it means over thinking about problems. Women, in general,

16

are more likely than men to engage in rumination. Rumination tendency appears to be moderated by
age. Differences are largest during young adulthood and smallest after age 65.
F.Organizational Constraints: The organization itself constrains decision makers. This happens due
to policies, regulations, time constraints, etc.
Performance evaluation: Managers are strongly influenced in their decision making by the criteria by
which they are evaluated. Their performance in decision making will reflect expectation.
Reward systems: The organizations reward system influences decision makers by suggesting to them
what choices are preferable in terms of personal payoff.
Formal Regulations: Organizations create rules, policies, procedures, and other formalized
regulations to standardize the behavior of their members.
System-imposed time constraints: Organizations impose deadlines on decisions. Decisions must be
made quickly in order to stay ahead of the competition and keep customers satisfied. Almost all
important decisions come with explicit deadlines.
Historical Precedents: Decisions have a context. Individual decisions are more accurately
characterized as points in a stream of decisions. Decisions made in the past are ghosts, which
continually haunt current choices. It is common knowledge that the largest determining factor of the
size of any given years budget is last years budget.
G. Cultural Differences: The rational model makes no acknowledgment of cultural differences. We
need to recognize that the cultural background of the decision maker can have significant influence
on:
a. selection of problems
b. depth of analysis
c. the importance placed on logic and rationality
d. whether organizational decisions should be made autocratically by an individual manager or
collectively in groups
Cultures, for example, differ in terms of time orientation, the importance of rationality, their belief in
the ability of people to solve problems, and preference for collective decision making. Some cultures
emphasize solving problems, while others focus on accepting situations as they are. Decision making
by Japanese managers is much more group-oriented than in the United States.
What about Ethics in Decision Making?
Ethical considerations should be an important criterion in organizational decision making.
A.Three Ethical Decision Criteria

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1. Utilitarian criteriondecisions are made solely on the basis of their outcomes or consequences.
The goal of utilitarianism is to provide the greatest good for the greatest number. This view tends to
dominate business decision making.
2. Focus on rightscalls on individuals to make decisions consistent with fundamental liberties and
privileges as set forth in documents such as the Bill of Rights. An emphasis on rights means
respecting and protecting the basic rights of individuals, such as the right to privacy, to free speech,
and to due process.
3. Focus on justicerequires individuals to impose and enforce rules fairly and impartially. There is
an equitable distribution of benefits and costs.
Advantages and liabilities of these three criteria:
Utilitarianism
a. Promotes efficiency and productivity
b. It can result in ignoring the rights of some individuals, particularly those with minority
representation in the organization.
Rights
a. Protects individuals from injury and is consistent with freedom and privacy
b. It can create an overly legalistic work environment that hinders
efficiency.

productivity and

Justice
a. Protects the interests of the underrepresented and less powerful
b. It can encourage a sense of entitlement that reduces risk taking, innovation, and productivity.
Decision makers tend to feel safe and comfortable when they use utilitarianism. Many critics of
business decision makers argue that this perspective needs to change. Increased concern in society
about individual rights and social justice suggests the need for managers to develop ethical standards
based solely on non-utilitarian criteria.
For example: Bribery is commonplace in countries such as China. A manager of a large U.S. company
operating in China caught an employee stealing. She fired him, turned him over to the local
authorities, only to learn later that the employee had been summarily executed. While ethical
standards may seem ambiguous in the West, criteria defining right and wrong are actually much
clearer in the West than in Asia. Few issues are black-and-white there; most are gray.
After the Decision Making

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After a decision is made, people experience a variety of reactions. In addition, present decisions
influence future decision making. Several of the outcomes that may result from a decision are regret
or satisfaction; both of which influence upcoming decisions.
Regret, feelings of disappointment or dissatisfaction with a choice made is one potential outcome of
decision making. Interestingly, regret may shape the decision making process. According to Abraham
and Sheeran (2003), anticipated regret is the belief that the decision will be result of inaction.
Anticipated regret may prompt behavior; that is, when a person indicates they will do something, such
as exercise, they may follow through with their intended decision, to avoid regret. Once the decision
is made, the impact of the decision, if regret is experienced, will impact future decisions. People can
often get consumed with examining the other options that were available; the path not taken (Sagi &
Friedland, 2007).
Sagi and Friedland (2007) theorized people feel regret in accordance with how the decision was made;
regret may be dependent on the number of options that were available during the decision making
process; and how varied the options were may impact how regret is experienced after the decision was
made. Through a series of experiments, Sagi and Friedland concluded that people feel remorse
because they feel they were able to make a better choice by looking at more information, previously
disregarded, and carefully weighing the pros and cons of each choice. In addition, regret is magnified
when individuals revisit the other available options and considering what satisfaction the other option
would have brought them. Interestingly, people who are dissatisfied with their decision feel obligated
to embrace the decision, as a means to reducing anxiety regarding the quality of the decision (Botti &
Iyengar, 2004; see also Gilbert & Ebert, 2002). For example, when a job applicant does not get hired,
he may restructure the experience, and find many reasons that explain why he did not want to work
for the company.
In addition to regret, individuals may also experience satisfaction with their decisions. Satisfaction
refers to how pleased the decision maker is with the outcome of the decision. There are many things
that impact levels of satisfaction. Botti and Iyengar (2004) observed individuals prefer to make their
own decisions and believe they will be more satisfied with their choices; however, when people are
given only undesirable options, decision makers are less satisfied than those who have had the choice
made for them. Botti and Iyengar posited the explanation for this phenomenon is that the decision
maker assumes responsibility for the decision made. As a result, if the available choices are bad, they
may feel as though they are responsible for making poor choices.
Also fascinating, aside from heuristics, an important decision making strategy is evaluating positive
and negative aspects of choices. Kim et al. (2008) discovered that when younger and older adults use
this strategy, older adults tend to list more positive and fewer negative aspects of each choice, and
older adults register more satisfaction with their choices when they use this evaluative strategy. One
interesting finding was when the participants did not evaluate the options by listing the positive and
negative features; there was no age difference in satisfaction (Kim et al., 2008).
As explained, future decision making is based on past decisions, as well as levels of satisfaction or
regret (Abraham & Sheeran, 2003; Juliusson, Karlsson, & Garling, 2005; Sagi & Friedland, 2007).
Even though there is evidence to support this notion, in many cases, particularly when the decision
may be reversed, decisions may be based on the reversibility factor (Gilbert, & Ebert, 2002).
Significant to individuals satisfaction is that people are willing to pay a premium for the opportunity
to change their minds at a later date (Wood, 2001). For example, catalogue shoppers purchase items in
a two step process; first they decide to purchase the items, then once the items arrive, they decide if
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they will keep them. Gilbert and Ebert examined if people prefer making decisions that are reversible.
They concluded that people do prefer to have the option to change their minds; although peoples
ability to change their minds actually inhibits their ability to be satisfied with their choice.

An Innovative Decision Making Approach

Decision making is a critical aspect to feeling successful and happy in life; decision making is at the
root of all we do. It is important to develop effective decision making skills and strategies. Problem
solving strategies include, but are not limited to brain storming, cost benefit analysis, written
remediation plans, and an examination of possible choices (Wester, Christianson, Fouad, & SantiagoRivera, 2008). The decision making process can be complicated and overwhelming. As a result, it is
valuable for individuals to learn a model to follow, that may be applied to everyday decisions, as well
as life changing choices.
Krantz and Kunreuther (2007) posited that a goal and plan based decision making model is an
effective and sound approach to take in decision making; in this model, the individual is encouraged
to focus on goals, not happiness or usefulness. According to Krantz and Kunreuther, plans are
designed to meet one or more goals. That is, people make plans to unconsciously or consciously meet
the goals they have. And, some plans satisfy several goals. In this model, goals are context dependent
and plans are based on their ability to meet the goals. Essentially, in the goal/plan based model, the
context provides the backdrop for the decision that needs to be made; goals and resources, influenced
by the context, contribute to the development of plausible plans; while the decision making rules are
implemented and influence the plan that is ultimately chosen. Krantz and Kunreuther apply this theory
to the insurance business, but imply the theory may be appropriately applied to a variety of contexts.

CONCLUSION

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Decision making is an important area of research in cognitive psychology. Understanding the process
by which individuals make decisions is important to understanding the decisions they make. There are
several factors that influence decision making. Those factors are past experiences, cognitive biases,
age and individual differences, belief in personal relevance, and an escalation of commitment.
Heuristics are mental short cuts that take some of the cognitive load off decision makers. There are
many kinds of heuristics, but three are important and commonly used: representative, availability, and
anchoring-and-adjustment. After an individual makes a decision, there are several differing outcomes,
including regret and satisfaction. Decisions that are reversible are more desired and people are willing
to pay a premium for the ability to reverse decisions; though reversibility may not lead to positive or
satisfactory outcomes. Cognitive psychologists have developed many decision making models, which
explain the process by which people effectively make decisions. One innovative model is based on
goals and planning. There is yet a lot of research to be conducted on decision making, which will
enable psychologists and educators to positively influence the lives of many.

REFERENCES

de Bruin, W.B., Parker, A.M., & Fischhoff, B. (2007). Individual differences in adult decision-making
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Chapter 6. Perception and Individual Decision Making | EA Mendoza - Academia.edu. (n.d.).
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Epley, N., & Gilovich, T. (2006). The anchoring-and-adjustment heuristic. Psychological Science,
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How can perception affects the decision making process? | Shady Abd El-Nasser. (n.d.). Retrieved
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Rhim, I., & Lee, S. (2012). P2-17: Individual Differences in Dynamic Criterion Shifts during
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