Decision-Making

Hi, and welcome to Organisational Behaviour. I’m Dr Jennifer Spoor. In this video we will overview models of decision-making.

Management Decisions in Context

Decision making has long been recognised as a core task for most managers. For example, Henry Mintzberg’s early research on managerial roles identified decision roles as one of the principal roles for managers.

Decision-making is defined as process of identifying a problem or opportunity and choosing among alternative courses of action.

There are two basic types of problems and corresponding decision types.

Routine problems occur regularly, and based on past experiences there is usually a predetermined and standard solution, and the corresponding decisions are called programmed decisions.

Non-routine problems are unique and new. There usually isn’t a standard response available because the problem has not occurred in the past. Creativity is required to solve non-routine problems, and the decisions are crafted for the unique situation. Senior managers primarily face non-routine problems and need creative problem solving to craft an appropriate decision.

The type of decision that is made is also affected by the decision environment. There are three main conditions or environments that affect decisions.

In certain environments, there is sufficient information to predict the results or consequences of each alternative in advance.

In risky environments, there is a lack of complete certainty, but there is still some knowledge about probabilities of the results or consequences of selecting each alternative. Probabilities refer to the likelihood that an event will occur.  

In uncertain environments, managers lack certainty and are unable to assign probabilities to the possible outcomes. This is clearly the most difficult of the three decision-making environments.

Decision-making environments are further complicated by the fact that these are often quite mixed. If you have three alternatives, you might be certain about the effects of one alternative, but have uncertainty or risk involved in the other alternatives.

Rational Decision-Making Model

The rational decision-making model, or the standard economic model, assumes that decision-makers are systematic, rational and logical in how they go about making their decisions. The model assumes that decision-makers follow a systematic series of steps, as outlined on the slide.

In the first step, defining the problem involves identifying some discrepancy between an existing and desired state of affairs. Second, choosing the best decision process involves deciding which criteria will be important and relevant when making the decision. This step also involves determining the relative importance of those criteria. The third step is to generate possible options or alternatives to resolve the problem. And the fourth step is to evaluate the possible alternatives in terms of the selected criteria from Step 2, and determine the optimal decision. Some versions of the rational model also include an implementation and evaluation step. 

The rational model assumes that decision-makers have complete information and can evaluate that information in an unbiased an objective manner. The model also assumes that the decision-maker chooses the option with the highest utility, meaning that decision-makers seeks to optimise and find the best possible alternative.

Administrative or Bounded Rationality Decision-Making Model

The rational decision-making model describes an idealised view of decision making, or how decision-makers should go about the process. However, there is ample evidence that the rational model doesn’t explain what people actually do, mainly because people’s rationality is limited and bounded.

The administrative or bounded rationality model offers a more realistic picture of what decision making actually looks like in real life and within organisations. In particular, rather than seek out all possible alternatives and data about those alternatives, we base our decisions on a limited and often very biased subset of information.

Rather than seek out the best alternative or options, we often satisfice, meaning that we quickly accept an alternative or option that is ‘’good enough” or meets the minimum requirements.

There are many inter-related reasons why we engage in satisficing. For example, you may recall that we are susceptible to a number of perceptual biases, including selective attention, categorisation and confirmation bias. All of this potentially limits our ability to be objective and rational. In fact, perceptual biases potentially introduce errors and decision biases in all steps of the rational model.

Related to this, many decision problems are complex and potentially anxiety provoking, and this anxiety can be resolved once the decision is made. Thus, satisficing is much quicker than optimising.

Decision-makers are often faced with imperfect or incomplete information and must be able to make a decision quickly and under time pressure. Again, there often isn’t time, or there doesn’t feel like there is time, to seek out additional information.

The Role of Intuition

Intuition is the ability to know or recognise quickly and readily the possibilities of a given situation.

Intuition is a fast and unconscious process that is created from distilled experience. It relies on holistic associations, and quickly recognising links amongst seemingly disparate pieces of information. Intuition is affectively charged, meaning that it engages our emotions. Intuition is the ‘gut instinct’ that a decision-maker may experience in response to a non-routine problem. The decision-maker may not know precisely why here she feels a particular way or prefers a particular alternative, but just has a feeling that this is the right way to go.

Intuition is in some ways the least rational way of making decisions, but it can contribute to success in non-programmed decisions, especially for experienced managers and decision-makers. Research on intuition indicates that for experts and others with a lot of experience in a domain, intuition often leads them to a better decision or outcome than a more systematic process. However, for novices, intuition is often incorrect or may lead them astray. 

Intuition adds an element of spontaneity to managerial decision-making and, as a result, it offers the potential for greater creativity and innovation – especially in the risky and uncertain environments.

Intuition should be supplemented with evidence, wherever possible, especially for novice decision-makers. If you have an intuition regarding a decision, follow up to see what the evidence suggests.

 

Decision-Making

This is the end of the video. I’m Dr Jennifer Spoor, and thanks for listening.

Tags: assignmentexpert, assignmenthelp, assignmenthelpaustralia, assignmenthelper, assignmenthelpuk, assignmenthelpusa, assignmentwriting, bestpriceguaranteed, bestqualityguaranteed, london󾓪, myassignmenthelp, plagiarismfreework