VARIOUS APPROACHES TO

DECISION MAKING

Introduction
Decision is a choice made from available alternatives. Decision making is a ‘process of
identifying problems and opportunities and then resolving them’1. The main purpose of an
organisational decision is to” configure and direct the resource conversion process in such a
way as to optimize the attainment of objectives”2. Broadly they are classified into operating
decision, strategic decision and administrative decision. The four approaches to decision
making are:

1) Classical (Normative or Rational) approach.

Classical approach of decision making is based on economic assumptions. Managers are
expected to make decisions that are economically sensible and in the organizations best
economic interests. This approach is based on following assumptions.

1) The decision maker operates to accomplish goals that are known and agreed upon. Problems
are precisely formulated and defined.
2) The decision maker strives for conditions of certainty, gathering complete information. All
alternatives and the potential results of each are calculated.
3) Criteria for evaluating alternatives are known. The decision maker selects the alternative that
will maximize the economic return to the organization.
4) The decision maker is rational and uses logic to assign values, order preferences, evaluate
alternatives, and make the decision that will maximize the attainment of organizational goals.

This approach is considered to be normative, which means it defines how a decision maker
should make decisions .It also provide guidelines on how to reach an ideal outcome for the
organisation. It helps the decision maker to be more rational. This approach is most valuable
when applied to programmed decisions and to decisions characterized by certainty or risk,
because relevant information is available and probabilities can be calculated.

2) Administrative (Entrepreneurial/Bounded Rationality)

Approach.
Administrative model of decision making describes how managers actually make a
decision in different situation such as those characterized by nonprogrammable decision,
uncertainty and ambiguity. This approach is mainly based on the work of Herbert A Simon.

1 .Richard L. Daft,” The New Era of Management”, Thomson, First Indian Reprint 2007, Delhi P.306

2 .Madhukar Shukla, “Understanding Organisations”, Prentice Hall of India Pvt Ltd, 2007, New Delhi, P.129

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He proposed two concepts for this approach. They are,

1) Bounded rationality

Bounded Rationality means that people have limits or boundaries on how rational
they can be.

2) Satisficing
Satisficing means that the decision makers choose the first alternative that satisfies
the minimal decision criteria.

Administrative model is considered to be more realistic than classic model for complex non
programmed decisions. It is based on the following assumptions.

1) Decision goals are often vague, conflicting and lack consensus among managers.
Managers are often unaware of problems or opportunities that exist in the organisation
2) Rational procedures are not always used and, when they are, they are confined to a
simplistic view of the problem that does not capture the complexity of the real
organizational events.
3) Manager’s searches for alternatives are limited because of human, information and
resource constraints.
4) Most mangers settle for a satisficing rather than maximizing solution. This is partly
because they have limited information and partly because they have only vague criteria
for what constitutes a maximising solution.

This approach is considered to be descriptive. It describes how managers actually make

decisions in complex situations. It recognizes the human and environmental limitations that
affect the degree to which managers can pursue a rational decision making process.

Intuition
Another aspect of administrative decision making is intuition. It represents a quick
apprehension of a decision situation based on past experience but without conscious thought.
It is based on years of experience and practice that allows managers to decide quickly.

3) Political Approach
This is used for making non programmed decisions when conditions are uncertain,
information is limited and confusion on what goals to pursue or what course of actions to
take. In this approach the decisions are made through Coalition. Coalition is an informal
alliance among managers who support a specific goal. Coalition building gives several
managers an opportunity to contribute to decision making, enhancing their commitment to
the alternative that is ultimately adopted.

It closely resembles the real environment in which most managers and decision
makers operate. Decisions are complex, information is often ambiguous and disagreement
and conflicts over problems and solutions are normal. The four basic assumptions of the
political approach are as follows.

1) Organizations are made up of groups with diverse interests, goals, and values. Managers
disagree with problem priorities and may not understand or share the goals and interests
of other managers.
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 2) Information is ambiguous and incomplete. The attempt to be rational is limited by the
complexity of many problems as well as personal and organisational constraints.
3) Managers do not have the time, resources, or the mental capacity to identify all the
dimensions of the problem and process all relevant information. Managers talk to each
other and exchange viewpoints to gather information and reduce ambiguity.
4) Managers engage in the push and pull of debate to decide goals and discuss alternatives.
Decisions are the result of bargaining and discussion among the coalition members.

4) Consensus Building Approach.

This approach minimises the inherent constraints of the other three approaches. It is such an
approach that:

1) Allows maximum possible information to reach the decision maker.

2) Incorporate mechanisms that helps the decision maker to sift through the
information and arrive at a set of optimum decision alternatives, and
3) Increase the chance of arriving at a decision which is politically acceptable to
various coalitions and constituencies without compromising on its quality.

Consensus is more than mere acceptance of a decision by everyone. Strong

charismatic leaders often manage to receive a high level of acceptance and commitment to
their decisions from their followers. This may only show a high level of trust in the leader.
Consensus on the other hand has as much to do with personal commitment to a course of
action as with a shared intellectual agreement about the rationale as to why such a course of
action has to be followed. Strategic consensus is defined as “Agreement among top middle,
and operating level managers on fundamental priorities of the organisation. This agreement
shows itself in the actual decisions taken by managers”.1

Conclusion
These four approaches are used depending on the type of problem and decision to be
made. The other factors include personal preferences, whether the decision to be made is
programmable or not, risk characteristics of the problem, uncertainty and ambiguity. In the
first phase of decision making that is after identifying the problem, a suitable approach can be
made.

Bibliography
1 .Richard L. Daft,” The New Era of Management”, Thomson, First Indian Reprint 2007,
Delhi P.306

2 .Madhukar Shukla, “Understanding Organisations”, Prentice Hall of India Pvt Ltd, New
Delhi, P.129

1.Madhukar Shukla, “Understanding Organisations”, Prentice Hall of India Pvt Ltd New Delhi, P .145