Models of Decision Making23rd February 2020
The decision-making process though a logical one is a difficult task. All decisions can be categorized into the following three basic models.
(1) The Rational/Classical Model
(2) The Administrative or Bounded Rationality Model
(3) The Retrospective Decision-Making Model
All models are beneficial for understanding the nature of decision-making processes in enterprises or organizations. All models are based on certain assumptions on which the decisions are taken.
The Rational/Classical Model
The rational model is the first attempt to know the decision-making-process. It is considered by some as the classical approach to understand the decision-making process. The classical model gave various steps in decision-making process which have been discussed earlier.
Features of Classical Model
- Problems are clear.
- Objectives are clear.
- People agree on criteria and weights.
- All alternatives are known.
- All consequences can be anticipated.
- Decision makes are rational
Bounded Rationality Model or Administrative Man Model
Decision-making involve the achievement of a goal. Rationality demands that the decision-maker should properly understand the alternative courses of action for reaching the goals.
He should also have full information and the ability to analyse properly various alternative courses of action in the light of goals sought. There should also be a desire to select the best solutions by selecting the alternative which will satisfy the goal achievement.
Herbert A. Simon defines rationality in terms of objective and intelligent action. It is characterised by behavioural nexus between ends and means. If appropriate means are chosen to reach desired ends the decision is rational.
Bounded Rationality model is based on the concept developed by Herbert Simon. This model does not assume individual rationality in the decision process.
Instead, it assumes that people, while they may seek the best solution, normally settle for much less, because the decisions they confront typically demand greater information, time, processing capabilities than they possess. They settle for “bounded rationality or limited rationality in decisions. This model is based on certain basic concepts.
(a) Sequential Attention to alternative solution
Normally it is the tendency for people to examine possible solution one at a time instead of identifying all possible solutions and stop searching once an acceptable (though not necessarily the best) solution is found.
These are the assumptions that guide the search for alternatives into areas that have a high probability for yielding success.
Herbert Simon called this “satisficing” that is picking a course of action that is satisfactory or “good enough” under the circumstances. It is the tendency for decision makers to accept the first alternative that meets their minimally acceptable requirements rather than pushing them further for an alternative that produces the best results.
Satisficing is preferred for decisions of small significance when time is the major constraint or where most of the alternatives are essentially similar.
Thus, while the rational or classic model indicates how decisions should be made (i.e. it works as a prescriptive model), it falls somewhat short concerning how decisions are actually made (i.e. as a descriptive model).
Retrospective decision model (implicit favourite model)
This decision-making model focuses on how decision-makers attempt to rationalise their choices after they have been made and try to justify their decisions. This model has been developed by Per Soelberg. He made an observation regarding the job choice processes of graduating business students and noted that, in many cases, the students identified implicit favorites (i.e. the alternative they wanted) very early in the recruiting and choice process. However, students continued their search for additional alternatives and quickly selected the best alternative.
The total process is designed to justify, through the guise of scientific rigor, a decision that has already been made intuitively. By this means, the individual becomes convinced that he or she is acting rationally and taking a logical, reasoned decision on an important topic.
Some Common Errors in Decision-Making
Since the importance of the right decision cannot be overestimated enough for the quality of the decisions can make the difference between success and failure. Therefore, it is imperative that all factors affecting the decision be properly looked into and fully investigated.
In addition to technical and operational factors which can be quantified and analyzed, other factors such as personal values, personality traits, psychological assessment, perception of the environment, intuitional and judgemental capabilities and emotional interference must also be understood and credited.
Some researchers have pinpointed certain areas where managerial thinking needs to be re-assessed and where some common mistakes are made. These affect the decision-making process as well as the efficiency of the decision, and must be avoided.
Some of the errors are
Decision-making is full of responsibility. The fear of its outcome can make some people timid about taking a decision. This timidity may result in taking a long time for making a decision and the opportunity may be lost. This trait is a personality trait and must be looked into seriously. The managers must be very quick in deciding.
(b) Postponing the decision until the last moment
This is a common feature which results in decision-making under pressure of time which generally eliminates the possibility of thorough analysis of the problem which is time consuming as well as the establishment and comparison of all alternatives. Many students, who postpone studying until near their final exams, usually do not do well in the exams.
Even though some managers work better under pressures, most often an adequate time period is required to look objectively at the problem and make an intelligent decision. Accordingly, a decision plan must be formulated; time limits must be set for information gathering, analysis and selection of a course of action.
(c) A failure to isolate the root cause of the problem
It is a common practice to cure the symptoms rather than the causes. For example, a headache may be on account of some deep-rooted emotional problem. A medicine for the headache would not cure the problem. It is necessary to separate the symptoms and their causes.
(d) A failure to assess the reliability of informational sources
Very often, we take it for granted that the other person’s opinion is very reliable and trustworthy and we do not check for the accuracy of the information ourselves.
Many a time, the opinion of the other person is taken, so that if the decision fails to bring the desired results, the blame for the failure can be shifted to the person who had provided the information. However, this is a poor reflection on the manager’s ability and integrity and the manager must be held responsible for the outcome of the decision.
(e) The method for analyzing the information may not be the sound one
Since most decisions and especially the non-programmed ones have to be based upon a lot of information and factors, the procedure to identify, isolate and select the useful information must be sound and dependable. Usually, it is not operationally feasible to objectively analyse more than five or six pieces of information at a time.
Hence, a model must be built which incorporates and handles many variables in order to aid the decision makers. Also, it will be desirable to define the objectives, criteria and constraints as early in the decision-making process as possible.
This would assist in making the process more formal so that no conditions or alternatives would be overlooked. Following established procedures would eliminate the efforts of emotions which may cloud the process and rationality.
(f) Do implement the decision and follow through
Making a decision is not the end of the process, rather it is a beginning. Implementation of the decision and the results obtained are the true barometer of the quality of the decision. Duties must be assigned, deadlines must be set, evaluation process must be established and contingency plans must be prepared in advance. The decisions must be implemented whole heartedly to get the best results.