Many psychologists have found out that perceptual errors can disrupt the efficient decision-making capabilities of individuals. These issues can also be seen among the top management of big companies and have often resulted in wrong decision-making.
One of the regular perceptual errors is the ‘halo effect’ which happens when an individual has the tendency to create an impression of others in one area and uses that to influence opinions in other areas. In organisations, top management can sometimes form an overall conclusion based on the performance of a specific department. This leads to distorted judgement and is sometimes deemed unfair as the performance of employees in different fields is supposed to vary and cannot be judged on familiar ground. One of the classic examples of halo effect was seen during the early tenure of Marissa Mayer as the CEO of Yahoo. She was being considered the revolution that the technology industry needed. The Board of Directors and the general public were judging her performance based on the way the media portrayed her without noticing her poor control over her employees, unnecessary attention to detail, not being open to suggestions and more.
Another common and widely seen issue is the glass ceiling. This occurs when individuals are discriminated based on their gender, religion, races, etc. While we claim that the twenty-first century is here with equal rights for everyone, this is not the case in many scenarios. Complaints like minorities and female employees are not given equal opportunity to climb up the corporate ladder is heard at regular intervals. According to a report by Forbes (2016), only four per cent of the Fortune 500 companies are run by women. It is not like women are performing any less than men on any platform. In fact, the report further disclosed that start-up companies in the Silicon Valley that had at least one female founder performed better than all member teams by over 60 per cent. Still, only 10 per cent founders are women. These figures are alarming and reflect the kind of barriers women are facing in organisations despite several attempts at establishing a level playing field for all the employees.
Stereotyping is also quite prevalent in companies of all sizes and structures. It is commonly seen as individuals tend to form a flawed and generalised opinion about a particular individual or a group of people, leading to biased and ineffective decision making. Stereotyping, on the grounds of race, gender, and religion, has had severe impacts on the employees, companies, and the industry in the past. The legal regulations of many countries aim to protect the rights of minorities and have often fined and took aggressive and legal actions against the companies. According to an online article, BMW had to pay 1.6 million dollars to settle a lawsuit filed on the ground of racial discrimination during mid-2013. Other companies like Walmart, Tiffany and Co., General Electric, etc. also suffered from high level of fines on the same ground as BMW in the past. As a result, business experts have often stressed that the perception and decision making at top management must be free from all kinds of biases.
Another kind of perceptual error exists in the form of selective perception which is how individuals incline to perceive things the way they want to while ignoring the opposing viewpoints (viewing the situation from their particular frame of reference). This is mainly seen in companies that are run by leaders who do not appreciate creativity and inputs from the lower/mid-level employees. Today, creativity is more of a 'must have' rather than a 'good to have' quality for all types of established organisations. However, it is only possible in companies where the leaders at all level appreciate and promotes the culture of creativity rather than having their selective perceptions of being right all the time.
To fully utilise the resources at hand and promote a culture of growth and innovation, the top management needs to be fully aware of their perceptual errors. All the issues discussed above can and are having severe impacts in the organisation ranging from losing out on top performing employees to restraining organisational growth.
The writer is a final year student of BBA programme at Institute of Business Administration (IBA), University of Dhaka. He can be reached at [email protected]