Chapter Four

1. Chapter Four Perception, Decision Making, And Creativity Thomson South-Western Wagner & Hollenbeck 5e

2. Chapter Overview • This chapter examines the following topics: • Perceptual Processes • Attention • Organization • Recall • Reducing Perceptual Problems • Decision-Making Processes • The Rational Decision-Making Model • The Administrative Decision-Making Model • Reducing Decision-Making Errors • Creativity in Decision Making • The Creative Process • Creative People • Creativity-Inducing Situations

3. Introduction • Perception is the process by which individuals select, organize, store, and retrieve information • Decision making is the process whereby this perceived information is used to evaluate and choose among possible courses of action • Decision makers must be able to envision the future and use their vision to generate innovative and creative options

4. Perceptual Processes • Humans have five senses through which the world is experienced: sight, hearing, touch, smell, and taste • People react to what they perceive, but their perceptions do not always reflect objective reality; this discrepancy can create major problems

5. Attention • In the attention stage, most of the available information is filtered so that some enters the system but other information does not • The attention stage is critical because any information that is ignored at this stage can never figure into decision making • The effects of needs and interests on perceptions can be seen in the area of race relations at work • Research by Madeline Heilman

6. Organization • In the organization stage human receivers further simplify and organize incoming sensory data • Humans “chunk” several pieces of discrete information into a single piece of information that can be processed more easily • When chunking nonnumerical information, the chunks are called schemas: • Scripts: involve sequences of action • Shared mental model • Prototypes: enable chunking of people’s characteristics • Leader type • Stereotype

7. Recall • After information is organized, it must be stored in memory for later retrieval; information can be lost in this process • This loss can create illusions and lead to decision-making errors: • Availability bias: people tend to judge the likelihood that something will happen by the ease with which they can recall examples of it to mind • Hindsight bias: people feel they would have predicted the outcome to an event better than they actually did or better than they actually would have if they had been asked to make a forecast

8. Reducing Perceptual Problems • There are many ways that a human observer can fail to portray the environment accurately • There are many steps which can be taken to avoid these problems: • Increasing the frequency of observations • Taking care in how and when observations are made • Obtaining observations from different people and different perspectives • Seeking out information that is inconsistent with or contradicts current beliefs

9. Decision-Making Process • At the end of the process of perception, the decision has been framed and the decision maker has collected and discarded various pieces of information to arrive at the final set of information that will be used in making the final decision • Two general models are employed in understanding the decision-making process

10. The Rational Decision-Making Model • The rational decision-making model is sometimes referred to as the rational economic model, reflecting its ties to classic theories of economic behavior • Ideally, observers use this information in a rational way to reach final decisions; however, this is not always the case • Decision-making illusions demonstrate how things can go wrong when utilizing this model

11. Evaluating Outcomes: Loss-aversion bias: preference for sure outcomes as opposed to risky ones Arthur Anderson and Enron example Multiple outcomes need to be met and these may be at odds with each other Speed and accuracy of decision making example Evaluating Probabilities: Base rate bias: giving too much weight to the evidence provided by the witness and not enough weight to the evidence provided by the base rate City cab example Misplaced confidence Murphy’s law and the house builder example The Rational Decision-Making Model

12. The Rational Decision-Making Model • Dynamic Influences: • Escalation of commitment: people invest more heavily in an apparently losing course of action so as to justify their earlier decisions • Usually the investments once this process gets started are disproportionate to any gain that could conceivably be realized and the level of irrationality becomes particularly pronounced when the project nears completion

13. The Rational Decision-Making Model • Factors Limiting Rational Decision-Making Models: • The complexity of real-world decision situations often makes rationality impossible to achieve • Herbert A. Simon • Rational models only work if there is general agreement on the definitions of problems, decisions, and decision-making goals • Difficulty in trying to generate an exhaustive list of alternatives and then selecting the best one • Boeing example • Bounded discretion: refers to the fact the list of alternatives generated is restricted by social, legal, and moral norms • In some cases, social norms and traditions may limit options and the rational decision may conflict with these customs • High-tech industry example

14. The Rational Decision-Making Model • Factors Limiting Rational Decision-Making Models: • When organizational decision makers choose alternatives that fall outside the legal or ethical boundaries, this often triggers whistle-blowers to go public with information that can be highly damaging to the company • This model assumes that one can evaluate the implemented alternative by checking the actual outcome against the initial intentions • Noisy environments

15. The Administrative Decision-Making Model • One of the most influential alternatives to the rational decision-making model is Herbert Simon’s administrative decision-making model • According to Simon, the rational decision-making model may outline what managers should do, but this model provides a better picture of what managers actually do • This models differs from the rational model in several important ways: • Satisficing versus optimizing • Satisficing: means settling for the first alternative that seems to meet some minimum level of acceptance

16. Reducing Decision-Making Errors • It is possible to identify many different means of reducing errors in decision making: • Providing decision makers with aids that will force them to ask all the right questions, get all the right information, and then process the information in all the right ways • Computerized expert systems • Home Depot example • Chunking pieces of information • Loosely coupling: weakening the effect that one subgroup has on another • Develop separate project development and project evaluation teams

17. Creativity in Decision Making • One elusive quality essential to all decision making is creativity • Creative decisions consist of choices that are new or unusual but effective • Neither the rational nor the administrative decision making models deals with the issues of producing creative decisions

18. The Creative Process • Studies of people engaged in the creative process and examinations of the decision making processes of people who are famous for their creativity suggests that a discernible pattern of events leads up to most innovative solutions • Most innovative episodes can be broken down into four distinct stages: • Preparation: • Creative solutions rarely come out of the blue and requires assembling materials • Incubation: • Period in which it seems decision makers cease to expend effort on the problem • Insight: • The solution to the problem typically manifests itself in a flash of inspiration or insight • Verification: • The solution is tested more rigorously to determine its usefulness for solving the problem

19. Creative People • Certain characteristics of individuals seem to be associated with creative endeavors • A modest relationship appears to exist between creativity, general cognitive ability, and the specific capacities of reasoning and deduction • Personal characteristics such as interests, attitudes, and motivations are more important than intelligence in distinguishing creative people from the general population • Creative people generally set high goals for themselves • The creative person is unusually persistent and has a high level of energy • Age seems to be related to creativity

20. Creativity-Inducing Situations • Selecting people who have characteristics that seem to be related to creativity is not the only option for organizations that seek to increase their innovativeness • Providing specific and difficult goals and firm deadlines actually seems to stimulate creative achievement • Some firms set goals for creativity • The way in which these goals are framed is important • Certain characteristics of organizational culture may be related to creativity • Recognizing and rewarding creativity • Encouragement of risk taking • Supportive leadership • Encouragement of collaborative efforts • Exposing people to varying types of experiences