Decision making

As defined by Baker et al in their 2001 study, “efficient decision-making involves a series of steps that
require the input of information at different stages of the process, as well as a process for feedback.”

Individual decision making models

The rational model

The rational model of decision making is a systematic approach to making decisions based on
logical reasoning and objective analysis. It assumes that decision-makers have complete
information about the problem, are aware of all possible alternatives, and have the ability to
evaluate the consequences of each alternative accurately. The rational model is often used in
economics, management, and other fields where decision-making processes are critical.
The rational model typically consists of the following steps:
- Problem identification: Clearly define the problem that needs to be addressed. This
involves understanding the current situation and determining the goals or objectives to be
achieved.
- Information gathering: Gather relevant data and information related to the problem. This
can include facts, figures, statistics, expert opinions, and other sources of information.
- Generation of alternatives: Generate a list of all possible alternatives or solutions to the
problem. This step encourages creative thinking and brainstorming to explore different
options.
- Evaluation of alternatives: Evaluate each alternative based on predetermined criteria or
factors. This involves weighing the pros and cons, assessing the potential risks, and
considering the consequences of each alternative.
- Selection of the best alternative: Choose the alternative that best aligns with the goals and
criteria established in the earlier steps. The decision-maker selects the option that
maximizes benefits or minimizes costs and risks.
- Implementation: Develop a plan to implement the chosen alternative effectively. This
involves creating a detailed action plan, assigning responsibilities, and considering any
necessary resources or constraints.
- Evaluation and feedback: Monitor the implementation of the decision and evaluate its
outcomes. Assess whether the chosen alternative has successfully resolved the problem or
achieved the desired goals. Feedback from the evaluation process can be used to inform
future decision-making.
The rational model assumes that decision-makers are rational, objective, and have access to all
necessary information. However, in reality, decision-making is often influenced by cognitive biases,
time constraints, limited information, and organizational or personal constraints. Therefore, the
rational model may not always accurately reflect how decisions are made in practice. Other
models, such as bounded rationality, recognize these limitations and provide alternative
perspectives on decision-making processes.
In the context of decision-making, non-rational behaviors refer to deviations from the
assumptions of the rational model. These behaviors are characterized by cognitive biases,
emotions, heuristics, and other factors that can influence decision-making. Here are some
examples of non-rational behaviors:
- Cognitive biases: Various cognitive biases can affect decision-making, leading to non-
rational behaviors. For instance, confirmation bias occurs when individuals favor
information that confirms their existing beliefs and ignore contradictory evidence.
Anchoring bias refers to the tendency to rely too heavily on the first piece of information
encountered when making decisions. Availability bias occurs when people overestimate the
importance or likelihood of events based on how easily they can recall similar instances.
- Emotional influences: Emotions can have a significant impact on decision-making, often
leading to non-rational behaviors. For example, fear can lead to risk aversion, causing
individuals to choose safer options even when the expected benefits of riskier alternatives
outweigh the potential downsides. Similarly, overconfidence bias can arise from positive
emotions and lead individuals to overestimate their own abilities or the chances of success.
- Intuition: While intuition can sometimes be beneficial in decision-making, it often involves
non-rational processes. Intuition refers to quick, instinctive, and subconscious judgments
that bypass deliberate analysis. It relies on patterns, experiences, and gut feelings.
Although intuition can sometimes lead to good decisions, it can also result in biases or
errors due to its reliance on heuristics rather than careful evaluation.
- Satisficing: Satisficing occurs when individuals settle for a satisfactory solution instead of
seeking the optimal one. In this case, decision-makers may not explore all possible
alternatives but rather choose the first option that meets their minimum criteria or satisfies
their immediate needs. This behavior can arise from time constraints, limited information,
or cognitive limitations.
- Groupthink: Groupthink refers to the tendency of a group to make faulty decisions due to
the desire for harmony and consensus. In such situations, group members may suppress
dissenting opinions or critical analysis to maintain cohesion within the group. Groupthink
can lead to non-rational behaviors by preventing the exploration of alternative viewpoints
or the consideration of diverse options.

The concept of maximizing behavior

In the context of decision-making, individuals who exhibit maximizing behavior will thoroughly
evaluate all available options, consider the potential risks and rewards associated with each choice,
and select the alternative that offers the greatest expected benefits. They are focused on achieving
the best possible outcome and are willing to invest time and effort to gather information and
carefully assess the available alternatives.
A maximizing decision maker is an economic person preoccupied with attaining the highest
possible level of preferences or self-interest:
- There is a fixed objective and a well-defined and mutually exclusive set of alternatives.
 - Environmental constraints are ignored.
- The maximizing decision maker can estimate the outcome and calculate the expected value
of each alternative.
- The maximizing decision maker simply selects the alternative offering the highest expected
value in terms of the objectives.

Bounded rationality model

The bounded rationality model is an alternative perspective on decision-making that recognizes
the limitations of human rationality, and the constraints individuals face when making decisions.
Unlike the rational model, which assumes perfect information and unlimited cognitive capabilities,
bounded rationality acknowledges that decision-makers have limited cognitive resources, time,
and information.
According to this model, individuals make decisions by satisficing, which means they aim to find a
satisfactory solution that meets their minimum criteria rather than seeking the optimal or best
possible outcome.
Satisficing behavior is open to the environment, whereas maximizing behavior disregards the
environment.
This kind of behavior has some disadvantages, namely one may choose the first alternative too
rapidly, the belief that a satisficing choice is a “second-best” decisions, focus on the behavioral
aspects of decision making.
Retrospective decision model

Retrospective decision-making processes refer to decision-making that occurs after an event or situation
has taken place. These processes involve evaluating and reflecting on past decisions and their outcomes in
order to learn from them and make better decisions in the future. The focus is on analyzing what went well,
what went wrong, and identifying lessons that can inform future decision-making.

The term "implicit favorite" refers to a concept in decision-making and psychology related to
preferences and biases. It describes a situation where individuals exhibit a subconscious or implicit
preference for a particular option or outcome over others, despite not explicitly expressing or
acknowledging that preference.
Implicit favorites can lead to biased evaluations and choices, as individuals may unconsciously
favor a particular option without objectively considering all available alternatives. This can
introduce unfairness, irrationality, or inconsistency in decision-making processes.

Types of decisions

Programmed Decisions:
- Repetitive and Routine: They are decisions that organizations or individuals encounter
frequently, and for which established procedures or guidelines exist.
- Pre-established Rules: Programmed decisions are made based on predetermined rules,
policies, or standard operating procedures (SOP).
- Objective and Clear Criteria: The decision criteria are often well-defined and quantifiable,
allowing decision-makers to compare alternatives and make consistent choices.
- Low Complexity: Programmed decisions are relatively simple and straightforward, as they
involve familiar situations and well-established responses.
- Short Decision-making Time: Due to the predefined rules and criteria, programmed
decisions can be made quickly and efficiently. Decision-makers can follow the established
procedures to arrive at a decision promptly.

Non-Programmed Decisions:
- Uncommon and Unique: Non-programmed decisions are uncommon and unique decisions
that arise in novel or complex situations. They do not have pre-established rules or
guidelines.
- No alternative is clearly correct.
- Lack of Predefined Procedures: Non-programmed decisions do not have pre-established
procedures or guidelines to follow. Decision-makers need to analyze the situation, explore
alternatives, and develop new approaches.
 - High Complexity: Non-programmed decisions are generally more complex and challenging
than programmed decisions. They often involve significant uncertainty, multiple variables,
and require extensive analysis and judgment.
- Longer Decision-making Time: Due to the absence of predefined procedures, decision-
makers need to gather information, evaluate alternatives, and carefully consider the
potential outcomes before arriving at a decision.

Values in decision making

In decision-making, values play a crucial role as they guide individuals in making choices and evaluating
options. Values comprise a guidance system for decision-making and permeate the entire process of choice.
Some of the basic properties of values are:

- Subjectivity: Values are subjective in nature, as they represent an individual's beliefs, preferences,
and judgments about what is important or desirable.
- Hierarchical: Values are often organized in a hierarchical manner, with some values considered
more important or fundamental than others.
- Stable and Enduring: Values tend to be relatively stable and enduring over time. They are deeply
ingrained in an individual's belief system and are resistant to change. However, values can evolve or
shift through experiences, personal growth, or changing circumstances.
- Conflict and Trade-offs: Values can sometimes conflict with each other, creating dilemmas and
trade-offs in decision-making. When faced with competing values, individuals must weigh the
importance of each value and make choices that align with their personal hierarchy of values.
 - Cultural and Social Influence: Values are influenced by cultural and social factors. Societal norms,
traditions, and beliefs shape the values of individuals within a given culture or community.
- Personalization: Values are personal and can vary from person to person.

Managerial values comprise both individual and organizational values.

Ethical Behavior

Ethics constitute the normative standards for management decision making. In reality, ethics change to fit
the attitude of the decision maker and the specific variables in the decision at hand. Therefore, ethics
comprise a transitional phenomenon in managerial decision making. Although declaredly normative, ethics
are highly subjective and ephemeral. It is tenuous to judge a managerial decision on its ethical merits.

Value conflicts (individual vs the organization, the organization vs society)

Value conflicts are inevitable at all levels. Value conflicts may have favorable or unfavorable consequences.

Group problem solving techniques

Logrolling refers to the practice of exchanging favors or support between individuals or groups to
gain mutual benefits.

4 group decision making techniques

Brainstorming:
Brainstorming is group problem-solving technique aimed at generating a large number of creative
ideas and solutions (quantity > quality). Participants are encouraged to freely express their ideas
without criticism or judgment. The goal is to promote divergent thinking and foster a collaborative
environment where unique and innovative solutions can emerge. The focus is on quantity rather
than quality during the idea generation phase. Once all ideas are gathered, they can be evaluated
and refined in subsequent stages of the problem-solving process.

Nominal Group Technique (NGT):

The Nominal Group Technique (NGT) is a structured group problem-solving method that allows for
individual idea generation and collective decision-making.

Delphi Technique:
The Delphi Technique is a structured and iterative group problem-solving method that seeks to
achieve consensus among a panel of experts. It is particularly useful when dealing with complex
or uncertain problems.
In the Delphi Technique,
- experts provide their opinions or insights on a problem or issue anonymously.
- A facilitator collects and summarizes the responses, removing any identifying information,
and redistributes the consolidated feedback to the participants.
- The participants review the feedback and may revise their opinions based on the input
from others.
- This process continues iteratively until a consensus or convergence of opinions is reached.
The Delphi Technique allows for the systematic exploration and refinement of ideas while
preserving the anonymity of participants to encourage unbiased contributions.
Consensus Mapping:
Consensus Mapping is a group problem-solving technique that aims to identify areas of
agreement and disagreement among participants on a specific issue. It is a visual representation
of collective opinions or perspectives.
In a consensus mapping session,
- participants provide their input on a particular topic or problem individually, typically using
sticky notes or markers on a large board or paper.
- The ideas or responses are then grouped and categorized based on similarities or themes.
- Through discussion and deliberation, participants work towards identifying areas of
agreement and disagreement, and the resulting consensus map provides a visual
representation of the shared understanding and areas that require further attention or
resolution.

Remember Bolstering (exaggerating the favorable consequences and minimizing the importance of
unfavorable consequences of a decision).