Perception and Decision Making

It is impossible to live a life that does not involve the abstract concept of perception. Perception is essentially how people perceive information in relationship to their personal environment and then form a set of beliefs or opinions from said perceptions.

In the business world, management is required to make decisions. While a great deal of the decision making process would appear to be based on empirical facts, the reality is that perception of fact as opposed to actual fact is often the barometer used to make decisions.

Because different individuals may have different perceptions on the same issue, it becomes very important for managers to base their decisions on critical thinking and facts so as to avoid the potential problem of making decisions on perceptions that are not entirely accurate.

The idea that “true” reality is never truly graspable by humans’ sensory and cognitive equipment goes back at least to the works of Plato. There is, for instance, the distinction between appearances and reality. Show a three-year-old a red ball beneath a green filter and he will typically say that the ball is black, even though he had previously been given the ball to examine.

Understanding of this appearance-reality distinction seems so necessary to everyday life that it is hard to imagine a society in which normal people would not acquire it. But the lesson is relatively new historically, such as the lesson of perspective in painting, or the intentional designing of optical illusions (such as the Ponzo illusion), or in the differing testimonies of eye-witnesses of the same event. The fact is that we all do not perceive the same things alike. (Kearl)

If there was one caveat about perception, perception is not necessarily reality. Perception is a person’s interpretation of reality that may or may not be completely accurate, if it is accurate at all. Because of this, it is important for management to ascertain reality, as opposed to a perceptual reality or a problematic situation might be the result.

What sets great leaders apart is their ability to manage perceptions. What people observe or assess as your ability to be a leader and your effectiveness becomes their perception, which in turn becomes reality. Perceptions that are not manages become rumors, then gossip, then backbiting, which leads to destruction. Unmanaged perceptions become a reality that was not intended. Perception management requires asking questions and getting feedback from others…

For example, oftentimes, management will ask other employees for a “report” on a new hire. This is a terrible idea because second hand information can often be skewed and it is best for management to make decisions based on first hand experience rather than second hand experience, yet managers will repeatedly make such an extremely foolish error.

Consider the following: a manager asks an employee how a new hire is performing. The employee speaks very badly about the performance of the new hire so the manager fires the employee. This is based on a perception of the new hire based on second hand information that has been deemed accurate. However, not all is what it seems.

When the new hire is fired, something comes to light that turns out to be very embarrassing to management. The employee who provided the poor evaluation of the new hire turns out to have based the negative report not on the truth, but rather on discriminatory biases. The terminated employee later files EEO complaints and lawsuits against the company, all of which proves to be incredibly embarrassing to the management, if not costly.

What was the root cause of this disaster? Management drew a perception of the employee that was not based on reality. Because there was no first hand data that shaped the perception, the perception that was shaped was one that was not based in reality. In short, perception is utterly useless if it is inaccurate because it will lead to decisions that come from a thoroughly flawed perspective. If the perception is harmful, then what good can possibly come from it?

This importance for the empirical assessment of facts in the decision making process works on both an internal and external level, as it is important that management decisions provide customers with what the customers actually want. Again, the need for proper feedback plays a great factor in this.

In other words, it is of absolute paramount importance for management to understand what their customers want. Again, there will be a perception as to what customers want vs. what they actually want. If management becomes single minded and focused on what customer’s want and that perception is inaccurate, the results can be cataclysmic. Nothing more famously illustrates this problem more that the total failure of “New Coke” in the 1980’s.

Believing that the public was more interested in Pepsi because of its sweeter taste, the Coca-Cola Company believed that the public would be willing to accept a new type of Coke that would taste similar to Pepsi. This was one of the most insanely inaccurate perceptions of consumer desire in history!

In reality (not perceptually!), the public was not interested in a form of Coca-Cola that tasted like Pepsi nor did Coca-Cola do itself any favors by essentially communicating that Pepsi had a superior product. The campaign was a complete and total disaster and it was the result of poor perception of the consumer market on the part of Coca-Cola.

So, what is a manager to do when it comes to making sure that perception and proper decision making go hand in hand?

Arguably the most difficult and critical step in the decision making process is to identify and clarify the problem or issue. Pressed for time and feeling a sense of urgency, governance leaders often rush through this step. An incomplete diagnosis or assessment restricts a boards’ capacity to expand options and select the most appropriate one. Without proper attention paid to this step, boards may come up with a solution that fails to address the etiology of the problem. (Scott)

Again, the key to making a proper decision is to manage perception and the key to managing perception involves staying properly informed. If anything, a flawed perception is one that is based on limited or inaccurate information as seen in the case of new Coke or in the hypothetical case of the terminated employee. Ultimately, decision making will always be based on personal perceptions, but the more informed a manager is, the closer the manager’s perception will be to actual reality and not aligned to ignorance or flawed logic.

While this seems like an academic point, managers can often approach a problem with blinders on based on personal biases in the decision making process. Regardless of what decision one makes, it will fall into the category or either a good decision or a bad decision. If flawed, then management must face the consequences.

Bibliography

Kearl, Michael. (DB) “Social Factors Shaping Perception and Decision Making.”

Retrieved February 17, 2007 from http://www.trinity.edu/~mkearl/socpsy-5.html

Russell, Jefffrey. (2001) “Are You Managing Perception?” Retrieved February 17,

2007

Scott, Katherine Tyler. (2006) “The Dynamics of Decision Making.” Retrieved February

16, 2007