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a. Idea generation: once we have collected the relevant information, it is time to
translate that knowledge into ideas.
i. Idea generation: the process of creative behavior in which we develop
possible solutions to a problem from relevant information and knowledge.
b. Idea evaluation: finally, it’s time to choose from the ideas we have generated.
i. Idea evaluation: the process of creative behavior in which we evaluate
potential solutions to identify the best one.
B. Causes of Creative Behavior
1. Creative potential
2. Is there such a thing as a creative personality?
a. Indeed. Most people have some of the characteristics shared by exceptionally
creative people. The more of these characteristics we have, the higher our creative
potential.
3. The potential for creativity is enhanced when individuals have abilities, knowledge,
proficiencies, and similar expertise to their field of endeavor.
4. Creative environment
5. What environmental factors affect whether creative potential translates into creative
behaviors?
a. First, and perhaps most important, is motivation. If you aren’t motivated to be
creative, it is unlikely you will be.
b. It is also valuable to work in an environment that rewards and recognizes creative
work.
c. A recent nation-level study suggests that countries scoring high on Hofstede’s
culture dimension of individuality are more creative.
d. Good leadership matters to creativity too.
e. Studies show that diverse teams can be more creative, but only under certain
conditions.
6. Creative outcomes (Innovation)
7. We can define creative outcomes as ideas or solutions judged to be novel and useful
by relevant stakeholders.
a. Novelty itself does not generate a creative outcome if it isn’t useful. Thus,
“off-the-wall” solutions are creative only if they help solve the problem.
b. Softs skills help translate ideas into results.
II. Summary and Implications for Managers
A. Individuals base their behavior not on the way their external environment actually is, but
rather on the way they see it or believe it to be.
B. An understanding of the way people make decisions can help us explain and predict
behavior, but few important decisions are simple or unambiguous enough for the rational
model’s assumptions to apply.
C. We find individuals looking for solutions that satisfice rather than optimize, injecting
biases and prejudices into the decision process, and relying on intuition.
D. Managers should encourage creativity in employees and teams to create a route to
innovative decision making.
E. Specific implications for managers are below:
1. Behavior follows perception, so to influence behavior at work, assess how people
perceive their work. Often behaviors we find puzzling can be explained by
understanding the initiating perceptions.
2. Make better decisions by recognizing perceptual biases and decision-making errors
we tend to commit. Learning about these problems doesn’t always prevent us from
making mistakes, but it does help.
3. Adjust your decision making approach to the national culture you’re operating in and
to the criteria your organization values. If you’re in a country that doesn’t value
rationality, you don’t feel compelled to follow the rational decision making model or
to try to make your decisions appear rational. Adjust your decision approach to ensure
compatibility with the organizational culture.
4. Combine rational analysis with intuition. These are not conflicting approaches to
decision making. By using both, you can actually improve your decision making
effectiveness.
5. Try to enhance your creativity. Actively look for novel solutions to problems, attempt
to see problems in new ways, use analogies, and hire creative talent. Try to remove
work and organizational barriers that might impede your creativity.
EXPANDED CHAPTER OUTLINE
I. What Is Perception?
A. Perception is a process by which individuals organize and interpret their sensory
impressions in order to give meaning to their environment.
B. Why is this important to the study of OB?
1. Because people’s behavior is based on their perception of what reality is, not on
reality itself.
II. Factors That Influence Perception (Exhibit 6-1)
A. Factors that shape and can distort perception:
1. Perceiver
2. Target
3. Situation
B. Perceiver: When an individual looks at a target and attempts to interpret what he or she
sees, that interpretation is heavily influenced by personal characteristics of the individual
perceiver.
C. The more relevant personal characteristics affecting perception of the perceiver are
attitudes, motives, interests, past experiences, and expectations.
D. Target: Characteristics of the target can also affect what is being perceived. This would
include attractiveness, gregariousness, and our tendency to group similar things together.
For example, members of a group with clearly distinguishable features or color are often
perceived as alike in other, unrelated characteristics as well.
E. Context: The context in which we see objects or events also influences our attention. This
could include time, heat, light, or other situational factors.
III. Person Perception: Making Judgments about Others
A. Attribution Theory (Exhibit 6-2)
1. Our perceptions of people differ from our perceptions of inanimate objects.
2. Our perception and judgment of a person’s actions are influenced by these
assumptions.
3. Attribution theory suggests that 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:
a. Distinctiveness
b. Consensus
c. Consistency
4. Clarification of the differences between internal and external causation:
a. Internally caused behaviors are those that are believed to be under the personal
control of the individual.
b. Externally caused behavior is what we imagine the situation forced the individual
to do.
5. Three determining factors
a. Distinctiveness refers to whether an individual displays different behaviors in
different situations. What we want to know is whether the observed behavior is
unusual.
b. If it is, the observer is likely to give the behavior an external attribution.
c. If this action is not unusual, it will probably be judged as internal.
d. Consensus occurs if everyone who is faced with a similar situation responds in
the same way. If consensus is high, you would be expected to give an external
attribution to the employee’s tardiness, whereas if other employees who took the
same route made it to work on time, your conclusion as to causation would be
internal.
e. Consistency in a person’s actions. Does the person respond the same way over
time? The more consistent the behavior, the more the observer is inclined to
attribute it to internal causes.
6. Fundamental attribution error
a. There is substantial evidence that we have a tendency to underestimate the
influence of external factors and overestimate the influence of internal or personal
factors.
7. Self-serving bias
a. There is also a tendency for individuals to attribute their own successes to internal
factors, such as ability or effort, while putting the blame for failure on external
factors, such as luck. This is called the “self-serving bias” and suggests that
recipients will distort feedback provided to employees.
8. Cultural differences
a. The evidence on cultural differences in perception is mixed, but most suggest
there are differences across cultures in the attributions people make.
i. One study found Asian managers less likely to use the self-serving bias.
ii. On the other hand, Asian managers are more likely to blame institutions or
whole organizations.
iii. This tendency to make group-based attributions also explains why individuals
from Asian cultures are more likely to make group-based stereotypes.
b. Differences in attribution tendencies don’t mean the basic concepts of attribution
and blame completely differ across cultures, though.
i. Self-serving biases may be less common in East Asian cultures, but evidence
suggests they still operate across cultures.
ii. Studies indicate Chinese managers assess blame for mistakes using the same
distinctiveness, consensus, and consistency cues Western managers use.
i They also become angry and punish those deemed responsible for failure,
a reaction shown in many studies of Western managers.
B. Common Shortcuts in Judging Others
1. Introduction
a. We use a number of shortcuts when we judge others. An understanding of these
shortcuts can be helpful toward recognizing when they can result in significant
distortions.
2. Selective perception
a. Any characteristic that makes a person, object, or event stand out will increase the
probability that it will be perceived.
b. Since we can’t observe everything going on about us, we engage in selective
perception.
3. Halo effect
a. The halo effect occurs when we draw a general impression on the basis of a
single characteristic.
4. Contrast effects
a. We do not evaluate a person in isolation. Our reaction to one person is influenced
by other persons we have recently encountered.
b. Contrast effect can distort perception.
c. For example, an interview situation in which one sees a pool of job applicants can
distort perception. Distortions in any given candidate’s evaluation can occur as a
result of his or her place in the interview schedule.
5. Stereotyping
a. Stereotyping—judging someone on the basis of our perception of the group to
which he or she belongs.
b. Generalization is not without advantages. It is a means of simplifying a complex
world, and it permits us to maintain consistency. The problem, of course, is when
we inaccurately stereotype.
c. One problem of stereotypes is that they are widespread generalizations, though
they may not contain a shred of truth when applied to a particular person or
situation.
i. We have to monitor ourselves to make sure we’re not unfairly applying a
stereotype in our evaluations and decisions.
C. Specific Applications of Shortcuts in Organizations
1. Employment interview
a. Evidence indicates that interviewers make perceptual judgments that are often
inaccurate.
b. Interviewers generally draw early impressions that become very quickly
entrenched.
c. Studies indicate that most interviewers’ decisions change very little after the first
four or five minutes of the interview.
d. Recent research indicates that our individual intuition about a job candidate is not
reliable in predicting job performance, but that collecting input from multiple
independent evaluations can be predictive.
2. Performance expectations
a. Evidence demonstrates that people will attempt to validate their perceptions of
reality, even when those perceptions are faulty.
b. Self-fulfilling prophecy, or the Pygmalion effect, characterizes the fact that
people’s expectations determine their behavior. Expectations become reality.
3. Performance evaluation
a. An employee’s performance appraisal is very much dependent on the perceptual
process.
b. Although the appraisal can be objective, many jobs are evaluated in subjective
terms.
c. Subjective measures are problematic because of selective perception, contrast
effects, and so on.
IV. The Link Between Perception and Individual Decision Making
A. Individuals in organizations make decisions; they make choices from among two or more
options.
B. Decision making occurs as a reaction to a problem.
1. There is a discrepancy between some current state of affairs and some desired state,
requiring consideration of alternative courses of action.
2. One person’s problem is another’s satisfactory state of affairs.
C. Every decision requires interpretation and evaluation of information. The perceptions of
the decision maker will address these two issues:
1. Data are typically received from multiple sources.
2. Which data are relevant to the decision and which are not?
V. Decision Making in Organizations
A. The Rational Model, Bounded Rationality, and Intuition
1. Introduction
a. In OB, there are generally accepted constructs of decision making each of us
employs to make determinations: rational decision making, bounded rationality,
and intuition.
b. There are times when one strategy may lead to a better outcome than another in a
given situation.
2. Rational decision making
a. We often think the best decision maker is rational and makes consistent,
value-maximizing choices within specified constraints.
b. These decisions follow a six-step rational decision making model listed in
Exhibit 6-3.
i. Step 1: Define the problem.
ii. Step 2: Identify the decision criteria.
iii. Step 3: Allocate weights to the criteria.
iv. Step 4: Develop the alternatives.
v. Step 5: Evaluate the alternatives.
vi. Step 6: Select the best alternative.
c. The rational decision-making model assumes that the decision maker has
complete information, is able to identify all the relevant options in an unbiased
manner, and chooses the option with the highest utility.
d. Most decisions in the real world don’t follow the rational model.
i. People are usually content to find an acceptable or reasonable solution to a
problem rather than an optimal one.
ii. Choices tend to be limited to the neighborhood of the problem symptom and
the current alternative.
iii. As one expert in decision making put it, “Most significant decisions are made
by judgment, rather than by a defined prescriptive model.”
iv. People are remarkably unaware of making suboptimal decisions.
B. Bounded Rationality
1. When faced with a complex problem, most people respond by reducing the problem
to a level at which it can be readily understood.
a. This is because the limited information-processing capability of human beings
makes it impossible to assimilate and understand all the information necessary to
optimize.
b. People satisfice—they seek solutions that are satisfactory and sufficient.
2. Individuals operate within the confines of bounded rationality. They construct
simplified models that extract the essential features.
3. How does bounded rationality work?
a. Once a problem is identified, the search for criteria and options begins.
b. The decision maker will identify a limited list made up of the more conspicuous
choices, which are easy to find and tend to be highly visible, and they will
represent familiar criteria and previously tried-and-true solutions.
c. Once this limited set of options is identified, the decision maker will begin
reviewing it.
i. The decision maker will begin with options that differ only in a relatively
small degree from the choice currently in effect.
ii. The first option that meets the “good enough” criterion ends the search.
iii. Satisficing is not always a bad idea— a simple process may frequently be
more sensible than the traditional rational decision-making model.
d. To use the rational model in the real world, you need to gather a great deal of
information about all the options, compute applicable weights, and then calculate
values across a huge number of criteria.
i. All these processes can cost time, energy, and money.
ii. If there are many unknown weights and preferences, the fully rational model
may not be any more accurate than a best guess.
iii. Sometimes a fast-and-frugal process of solving problems might be your best
option.
C. Intuition
1. Perhaps the least rational way of making decisions is intuitive decision making, an
unconscious process created from distilled experience.
2. It occurs outside conscious thought; it relies on holistic associations, or links between
disparate pieces of information; it’s fast; and it’s affectively charged, meaning it
usually engages the emotions.
3. While intuition isn’t rational, it isn’t necessarily wrong.
4. Nor does it always contradict rational analysis; rather, the two can complement each
other.
5. The key is to neither abandon nor rely solely on intuition, but to supplement it with
evidence and good judgment.
VI. Common Biases and Errors in Decision Making
A. Introduction (Exhibit 6-4 shows how to reduce biases and errors)
1. Decision makers allow systematic biases and errors to creep into their judgments.
2. People tend to rely on experience, impulses, gut feelings, and rules of thumb. These
can lead to distortions.
B. Overconfidence Bias
1. Individuals whose intellectual and interpersonal abilities are weakest are most likely
to overestimate their performance and ability.
2. The tendency to be too confident about their ideas might keep some from planning
how to avoid problems that arise.
3. Investor overconfidence operates in a variety of ways.
a. People think they know more than they do, and it costs them.
b. Investors, especially novices, overestimate not just their own skill in processing
information, but also the quality of the information they’re working with.
C. Anchoring Bias
1. Anchoring bias involves fixating on initial information as a starting point and failing
to adequately adjust for subsequent information.
2. Anchors are widely used by people in advertising, management, politics, real estate,
and lawyers – where persuasion skills are important.
3. Any time a negotiation takes place, so does anchoring.
D. Confirmation Bias
1. Confirmation bias is a type of selective perception: we seek out information that
reaffirms past choices, and discount information that contradicts past judgments.
E. Availability Bias
1. Availability bias is the tendency for people to base judgments on information that is
readily available.
F. Escalation of Commitment
1. Escalation of commitment occurs when we stay with a decision even when there is
clear evidence that it’s wrong.
2. When is escalation most likely to occur?
a. Evidence indicates it occurs when individuals view themselves as responsible for
the outcome.
G. Randomness Error
1. Decision making becomes impaired when we try to create meaning out of random
events.
2. Our tendency to believe we can predict the outcome of random events is the
randomness error.
H. Risk Aversion
1. The tendency to prefer a sure thing instead of a risky outcome is risk aversion.
2. Risk aversion has important implications.
a. Risk-averse employees will stick with the established way of doing their jobs,
rather than taking a chance on innovative methods.
3. Ambitious people with power that can be taken away (most managers) appear to be
especially risk averse, perhaps because they don’t want to lose on a gamble
everything they’ve worked so hard to achieve.
4. Because people are less likely to escalate commitment where there is a great deal of
uncertainty, the implications of risk aversion aren’t all bad.
5. People will more likely engage in risk-seeking behavior for negative outcomes, and
risk-averse behavior for positive outcomes, when under stress.
I. Hindsight Bias
a. Tendency to believe falsely that one has accurately predicted the outcome of an
event, after that outcome is actually known.
b. The hindsight bias reduces our ability to learn from the past.
VII. Influences on Decision Making: Individual Differences and Organizational Constraints
A. Individual Differences
1. Research suggests that personality does influence our decisions.
a. Specific facets of conscientiousness—rather than the broad trait itself—may affect
escalation of commitment.
i Achievement-striving
(a) Achievement-striving people were more likely to escalate their
commitment, whereas dutiful people were less likely.
(b) Achievement-oriented people hate to fail, so they escalate their
commitment, hoping to forestall failure.
(c) Achievement-striving individuals appear more susceptible to the
hindsight bias, perhaps because they have a greater need to justify their
actions.
b. People with high self-esteem are strongly motivated to maintain it, so they use the
self-serving bias to preserve it. They blame others for their failures while taking
credit for successes.
2. Gender
a. Rumination refers to reflecting at length. In decision making, it means
over-thinking about problems.
b. Evidence indicates that women analyze decisions more than men.
i. Women, in general, are more likely than men to engage in rumination.
ii. Rumination tendency appears to be moderated by age. Differences are largest
during young adulthood and smallest after age 65.
3. Mental ability
a. We know people with higher levels of mental ability are able to process
information more quickly, solve problems more accurately, and learn faster, so
you might expect them also to be less susceptible to common decision errors.
4. Cultural differences
a. The rational model makes no acknowledgment of cultural differences, nor does
the bulk of OB research literature on decision making.
b. We need to recognize that the cultural background of a decision maker can
significantly influence the selection of problems, the depth of analysis, the
importance placed on logic and rationality, and whether organizational decisions
should be made autocratically by an individual manager or collectively in groups.
c. Cultures differ in their time orientation, the importance of rationality, their belief
in the ability of people to solve problems, and their preference for collective
decision making.
i. Differences in time orientation help us understand why managers in Egypt
make decisions at a much slower and more deliberate pace than their U.S.
counterparts.
d. While rationality is valued in North America, that’s not true elsewhere in the
world.
i. A North American manager might make an important decision intuitively but
know it’s important to appear to proceed in a rational fashion because
rationality is highly valued in the West.
ii. In countries such as Iran, where rationality is not as paramount as other
factors, efforts to appear rational are not necessary.
e. Some cultures emphasize solving problems, while others focus on accepting
situations as they are.
i. The United States falls in the first category.
ii. Thailand and Indonesia are examples of the second.
f. Because problem-solving managers believe they can and should change situations
to their benefit, U.S. managers might identify a problem long before their Thai or
Indonesian counterparts would choose to recognize it.
g. Decision making by Japanese managers is much more group-oriented than in the
United States.
i. The Japanese value conformity and cooperation.
ii. Before Japanese CEOs make an important decision, they collect a large
amount of information, which they use in consensus-forming group decisions.
5. Nudging
a. Commercials are one of the most outright forms of an organization’s attempt to
influence our perceptions of a product and our decision to acquire that product.
b. Nudging has also been used positively in the development of corporate social
responsibility (CSR) initiatives to change people’s expectations for organizations.
c. People differ in their susceptibility to suggestion, but it is probably fair to say we
are all receptive to nudging to some degree.
B. Organizational Constraints
1. Introduction
a. The organization itself constrains decision makers creating deviations from the
rational model.
2. Performance evaluation
a. Managers are strongly influenced in their decision making by the criteria by
which they are evaluated.
3. Reward systems
a. The organization’s reward system influences decision makers by suggesting to
them what choices are preferable in terms of personal payoff.
4. Formal regulations
a. Organizations create rules, policies, procedures, and other formalized regulations
to standardize the behavior of their members.
5. System-imposed time constraints
a. Organizations impose deadlines on decisions.
b. Such conditions often make it difficult, if not impossible, for managers to gather
all the information before making a final choice.
6. Historical precedents
a. Decisions have a context. Individual decisions are more accurately characterized
as points in a stream of decisions.
b. Decisions made in the past are ghosts that continually haunt current choices. It is
common knowledge that the largest determining factor of the size of any given
year’s budget is last year’s budget.
VIII. What about Ethics in Decision Making?
A. Introduction
1. Ethical considerations should be an important criterion in organizational decision
making.
B. Three Ethical Decision Criteria
1. Utilitarianism—decisions are made solely on the basis of their outcomes or
consequences.
a. The goal of utilitarianism is to provide the greatest good for the greatest number.
This view tends to dominate business decision making.
b. Promotes efficiency, productivity, and high profits.
2. Focus on rights—calls on individuals to make decisions consistent with fundamental
liberties and privileges as set forth in documents such as the Bill of Rights.
