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Rational and Behavioral Decision Making
Rational and Behavioral Decision Making
GAUTAM KUMAR CLASS ROLL NO. -15 MBA Ist Sem 2008-09
The term rationality implies and value maximizing choice within certain limits. The rational decision making is generally helpful in making non-programmed decisions. The is one that is logical and follows the orderly path from problem identification through solution. Rational is totally related to maximization of objectives.
1.INVESTIGATE THE SITUATION. -Define problem. -Diagnose cause. -Identify decision objectives.
2.DEVELOP ALTERNATIVES
4.IMPLEMENT AND MONITOR -plan implementation -monitor implementation and make necessary adjustment .
3.EVALUATE ALTERNATIVES AND SELECT THE BEST ONE -Evaluate alternatives. -Select best alternatives.
STAGE 2.DEVELOP ALTERNATIVES: 1.Brain storming 2.Nominal group technique 3.Delphi method 4.Consensus mapping
5.Past experience
6.Developing different visionary eyes
no
YES
NO
5.Potential risk and uncertainties, that is earlier evaluation-of-alternatives stages must be kept in mind. 6.Adecision is no better than the actions taken to make it reality. Even if decision is a good one ,if others are unwilling to carry it out, then the decision will not be effective. 7.Action taken to implement a decision must be monitored.
Value-Focused Thinking
creating alternatives uncovering hidden objectives identifying decision opportunities
Behavioral decision making is to understand how people make decisions and how they can make decision making process more effective and efficient. This type decision making allows for only three unique systems of decision: INDIVIDUALISM COLLABORATION POWER AND AUTHORITY
limited, simplified view of problems confronting them because of certain reasons: They do not have full information about the problems. They do not possess knowledge of all the possible alternative solutions to the problems and their consequences. They do not have abilities to process competitive environmental and technical information. They do not have time and resources.
Perfect rationality
Perfect knowledge of problems ,consequences
Normative
Descriptive
Search for a seemingly feasible feasible alternative rather than an exhaustive list
Satisficing good enough for adequate decisions
The decision making process receives inputs both from quantifiable and nonquantifiable variables
Optimal decisions
Concentration on technical-economic terms ,and quantifiable variables.
According to Hitt ,Middlemist and Mathis satisficing can occur for various reasons:
1.Time pressure 2.A desire to sit through a problem quickly and switch onto other matters. 3.A dislike for detail analysis that demand more refine techniques. 4.To avoid failure and mistake that could affect their future in a negative way.
External factors
Organizational objectives
Decision maker
Personal factors
Satisficing Decision
Observation
Questions
Experiment
Experiment
Hypothesis 5
Predictions
REFERENCES:
www.wikipedia.org http://www.sageereference.com/edleadership/article_n11.html Management by Ricky W. Griffin Eighth edition (2005) Indian Adaptation Management by J. A. F. Stoner, R. Edward Freeman Fourth edition. Human Behavior in Organization by John Neuston
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