Models of Decision Making

Decision Making:
Decision making is the process of making choices by identifying a decision, gathering
information, and assessing alternative resolutions.

Classical decision-making model:

it assumes that decision making is rational process, and it considers al possible alternatives,
exploring all possible consequences from among the alternatives. Decision is finally made after
analyzing all alternatives in detail. There are various steps involved in this whole process.

Steps involved in CDM process:

Problem identification:
first step is problem identification. Problem is identified when there is noticeable discrepancy
between existing and desired conditions.
Important aspects of problem identification:

 administrator must determine a level of performance so that actual performance

can be measured.
 Complex problems should be divided into sub problems and set priorities based
on the seriousness of the problem.
 Problem must be specified in terms of what, when, where and how big the
deviations are from the performance standard previously set.

Generating alternatives:
In this step, all possible alternatives should be included no matter how ridiculous they may first
appear and any alternative should not be eliminated too early. Every possible alternative is
considered, and the information is collected regarding each alternative. When generating
alternatives, decision makers use information gathered by defining the problem. The list of
alternatives can then only be as good, complete, and accurate as the quality of that data.
Overlooking factors or dimensions of an issue or problem can mean missing alternatives. The
alternatives identified become the basis for subsequent analysis and ultimately the decision
itself.

Evaluating alternatives:
All possible outcomes of alternatives are recognized in this step. Both negative and positive
aspects of outcomes are analyzed and likelihood of each possible outcome to each alternative is
assessed. Alternatives are compared and evaluated under certainty, risk and uncertainty.
  Certainty:
certainty exists when decision maker knows exactly what the probabilities of outcomes
of each alternative will be.

 Risk:
Risk exists when the decision maker estimates the probabilities of alternative outcome.

 Uncertainty:
when the decision maker does not know what the probabilities of outcome of each
alterative will be.

Choosing an alternative:
choosing an alternative means choosing the best course of action. The ideal plan should be the
most feasible, profitable and with least negative consequences. Two leading decision theorists
James march & Herbert Simon proposed five types of alternatives:

 A good alternative:
an alternative with more probability of possible outcome.

 A bland alternative:
an alternative with low probability of both positive and negative outcome.

 A mixed alternative:
an alternative with high probability of both positive and negative outcome.

 A poor alternative:
an alternative with low probability of positive outcomes and high probability of negative
outcomes.

 An uncertain alternative:
an alternative whose relative probabilities cannot be assessed.

Implementing the decision:

Once an alternative is chosen. it is implemented, that is, it is put into action. The actual process
of decision-making ends with the choice of an alternative through which the objectives can be
achieved. Before implementing, the decision maker will have already considered all conceivable
problems that may be associated with the implementation.
Evaluating the decision:
Evaluation is the final step of the formal decision process. Evaluating outcomes may help the
decision maker learn lessons that will improve decision-making abilities. It can also be valuable
to assess the process by which a decision was made to make future decisions more effective. it
is done by measuring actual performance against performance expected, and if discrepancy
occurs then the decision maker process must be recycled.

Behavioral decision-making model:

it assumes that decision makers are limited by time, knowledge, cost and the ability to process
information, and alternative solutions are based on their own experiences, intuition, advice
from others and perhaps even some creative thoughts. It also assumes that rationality is limited
and it is impossible to predict all possible consequences of alternatives and determine which
alternative is optimal.
Satisficing:
Satisficing is a decision-making strategy that aims for a satisfactory or adequate result, rather
than the optimal solution. Instead of putting maximum exertion toward attaining the ideal
outcome, satisficing focuses on pragmatic effort when confronted with tasks. It is about
choosing the first alternative that satisfies minimal standards of acceptability without exploring
al possibilities. It requires a great deal of effort, and may not even be possible, to gather all the
necessary information to make the best decision and satisficing thus represents the kinds of
decisions we are actually capable of making. Satisficing is all about making ‘good enough’
decisions instead of perfect ones.

Contextual rationality:
It suggests that a decision maker is embedded in environmental influences that constrain
purely rational decision making. It believes that if optimal decisions are made, these are
influenced by organizational realties which are internal and external politics, conflict resolution,
requirements, distribution of power and authority.
Retrospective rationality:
It allows the decision maker to be both biased and somewhat “irrational” in the process. The
decision is essentially made on instinct or gut, but then the decision maker goes through the
process of justifying their decision based on researching other options. Retrospection is
basically the action of looking back on events or situations. Another aspect of retrospective
rationality is tendency for decision makers to take personal responsibility for successful
decisions and denying the responsibility for bad decisions.
Incrementalism:
The incremental model splits the decision-making process into smaller steps. ... The decision-
makers are not fully rational and consider only a limited number of alternatives during each
step. The process relies on muddling through, including the decision-makers' experience and
intuition, rather than on formal procedures. It is particularly suited to situations when goals are
clear, but the methods are uncertain, allowing us to experiment and learn during the process. It
enables adjustments to be made easily and minimizes the cost of any failure.

Garbage can model:

In Cohen, March and Olsen's view, decision makers often operate in an irrational environment with a lot
of uncertainty. As a result, they make decisions without following the rational approach of gathering
facts and weighing the evidence thoughtfully. Garbage can decision making doesn't go looking for the
perfect solution. Instead, it mixes and matches the elements the organization has already piled into the
can:

 Choices looking for problems

 Issues and feelings looking for decisions to affect

 Solutions looking for issues they can resolve

 Decision-makers looking for something to do

The original 1972 theory concentrated on academic institutions. Later writers expanded it to
decision making in business. For a garbage can theory example, consider an entrepreneur who
is launching his third or fourth startup. When he runs into a problem, his first thought might be
to draw on experience: reach into the garbage can for one of the solutions he's used in similar
situations before.
The creators of the garbage can model believed people made decisions this way because
rational, formal decision making often wasn't practical.
School principals, for instance, have to reach decisions while navigating among multiple
stakeholders: students, teachers, parents, local school boards and other officials and possibly
the local community. Trying to balance the desires of all these interested parties with a rational,
analytical, calmly reasoned approach often proves impossible. That's particularly true when
decisions have to be made within a limited time, often under pressure.
The result? Principals default to making decisions based on their experience of what works and
the community's opinion of what outcomes are acceptable. They also want to make it obvious
that they're working hard on the problem. They may make decisions just to demonstrate that
the school is working on solutions, even if the solutions aren't helpful.
Is this model useful:
The creators of the garbage can model weren't recommending this approach as a way to make
decisions. Instead, they claimed this was how decision making usually worked. Problem solving in this
model is an anarchic mess where managers simply seize the first solution they dredge out of the trash.
Because that solution worked once, it might fix things again, but that isn't a slam dunk.
Critics of the model have several objections. One is that we don't pick solutions completely
randomly, even when we're under pressure. Instead, we're restrained by our pre-existing
biases. Another objection is that while many decisions may look random, that's because we
can't see some of the underlying influences shaping them.
There hasn't been a lot of research to confirm or disprove the original garbage can model. This
may be because people want leaders to make informed, well thought out and rational
decisions. Irrational decision making is seen as something to avoid, not study and analyze.

Vroom-Yetton normative model:

The Vroom-Yetton model is designed to help you to identify the best decision-making approach
and leadership style to take, based on your current situation. It was originally developed by
Victor Vroom and Philip Yetton in their 1973 book, "Leadership and Decision Making." No single
decision-making process fits every scenario. Instead, Vroom-Yetton offers a number of different
processes and directs you toward the best one for your situation. For example, if speed and
decisiveness are required then it will likely point you toward an autocratic process. If
collaboration is what's needed, then it will nudge you toward a more democratic process.
Researchers have found that managers are more effective, and their teams more productive
and satisfied, when they follow the model. The simplicity of Vroom-Yetton also means that
anyone – from the boardroom to the factory floor can use it. Although a little long-winded at
times, it can be particularly helpful in new or unusual situations. Practice using it, and you'll
quickly get a feel for the right approach to take, whether you're making a decision about a day-
to-day issue or dealing with a more complex problem.
It suggests that the best way to make a decision is to base it on the current situation or
problem; not the personal traits or style of the decision maker. The Vroom-Yetton model
identifies five possible decision-making styles that suggest varying personal involvement from
“completely autocratic” to “acceptance without direct influence.”
Before you start using the model, you'll need to consider these three factors:
Decision quality: Sometimes, making the "right" decision is critical, and you'll need to use a
large number of resources (people, time, information, and so on) to ensure that the action you
take has been well thought through and is of high quality.
Team commitment: Some of your decisions will have a major impact on your team, while
others will go unnoticed. When a decision will likely impact your team, it's best to use a
collaborative process. This will improve the quality of the decision, and you'll likely deliver a
successful result faster.
Time constraints: When the issue at hand isn't time sensitive, you have more "space" to
research your options and to include others, which will help to boost the quality of your
decision. If your time is limited, however, it may not be feasible to include others or to
undertake thorough research.

Specific leadership process:

The following codes represent the five decision-making processes that are described by the
model:

Autocratic (A1): You use the information that you already have to make the decision, without
requiring any further input from your team.
Autocratic (A2): You consult your team to obtain specific information that you need, and then
you make the final decision.
Consultative (C1): You inform your team of the situation and ask for members' opinions
individually, but you don't bring the group together for a discussion. You make the final
decision.
Consultative (C2): You get your team together for a group discussion about the issue and to
seek their suggestions, but you still make the final decision by yourself.
Collaborative (G2): You work with your team to reach a group consensus . Your role is mostly
facilitative, and you help team members to reach a decision that they all agree on.

Vroom-Yetton is a useful model, but it's not necessarily appropriate for all eventualities. It
misses out several important considerations, and its rigid structure means that it fails to take
into account subtleties, such as the emotions and dynamics of your team, and the task’s
complexity.