DECISION MAKING

MODEL

 Name : Prerna Dubey Submitted to:

 Roll no. 44 Dr. Rachna Mahajan
 Course : MBA ( Sem: 1st )
 Decision making
model

Classical
Administrative Retrospective
Model
Model Model
  The Classical Model

 The rational model is the first attempt to know the decision-making-process. It

is considered by some as the classical approach to understand the decision-
making process.

 Classical approach is also known as prescriptive, rational or normative model. It

specifies how decision should be made to achieve the desired outcome. Under
classical approach, decisions are made rationally and directed toward a single
and stable goal. It is applied in certainty condition in which the decision maker
has full information relating to the problem and also knows all the alternative
solutions. It is an ideal way in making decision. It is rational in the sense that it
is scientific, systematic and step-by-step process.
 ASSUMPTIONS
 First is a clearly defined problem. The model assumes that the decision-maker
has clearly set goals and knows what is expected from him.
 Next is a certain environment. The model further suggests that it is in the power
of the decision-maker to eliminate any uncertainty that might impact the
decision. As a result, there are no risks to account for.
 The third assumption is full information. The decision-maker is able to identify
all alternatives available to him and to evaluate and rank them objectively.
 The final assumption is rational decisions. The decision-maker is believed to
always be acting in the best interests of the organization.
PROCESS

Define the problem

Establish decision criteria

Consider all alternatives

Identify the best Alternative

Develop a plan of action

Evaluate Decision
 Features of Classical Model:

1. Problems are clear.

2. Objectives are clear.
3. People agree on criteria and weights.
4. All alternatives are known.
5. All consequences can be anticipated.
6. Decision makes are rational.
 Administrative Model
 The administrative model of decision making assumes that decision makers'
rationality is bounded and that they're willing to consider only a limited number
of criteria and alternatives before making decisions. As a consequence, they
settle for the first 'good enough' solution that they find.

 Inthe foundation of the administrative model of decision making lies the belief

that decision makers often settle for a less than ideal solution because of time and
motivation shortages. Instead of seeking the best solution that maximizes the
value of the decision, the decision maker accepts the first available 'good enough'
alternative producing a value above the minimally acceptable.
 Administrative Model (cont.)
 Because of the limited rationality of the decision maker, the model is also known as
the bounded rationality model. The limited rationality entails that the decision maker has a
limited number of criteria and considers a limited number of alternatives. The degree to
which the choice will be limited will depend upon the values and skills of the decision maker.
 The main drawback of this approach is, of course, a lowered quality of the final decision.
However, this model also has a number of benefits. Under certain circumstances, these can
well compensate for the loss in quality. First, this approach requires less time to reach a
decision. In a situation where time is costly or unavailable, settling for a 'good enough' option
can be an efficient strategy. Secondly, reaching for an ideal solution often means more
resources have to be dedicated for information gathering. So a solution reached with the
administrative model in mind is likely to be cheaper.
 Administrative Model (cont.)

 Herbert A. Simon, a Nobel prize winner developed the model to describe how
decisions are often made rather than to prescribe how they should be made.
Instead, it assumes that people, while they may seek the best solution, normally
settle for much less, because the decisions they confront typically demand
greater information, time, processing capabilities than they possess. This model
is based on certain basic concepts.
 Administrative Model (cont.)
 Bounded rationality:
It suggests that the managers make the most logical
decision, that they can within the constraints of limited information and ability.

 Satisfice:
In this, the managers accept the first satisfactory decision they uncover.
 Administrative Model (cont.)

 Heuristic:
These are the assumptions that guide the search for alternatives into areas that
have a high probability for yielding success. The method of decision making that
:
proceeds along the empirical lines using rule of thumb to find solution or answer.
 3. Retrospective decision model

 In this model, the decision maker is both irrational and biased. In this decision
maker makes a decision without evaluating the alternatives. This approach is
applicable in non-programmed decisions. The decision maker makes a decision
what he thinks is best suited. The implicit favorite decision-making model
provides the decision maker a means to evaluate other solutions against a
perceived best decision
 The total process is designed to justify, through the guise of scientific rigor, a
decision that has already been made intuitively. By this means, the individual
becomes convinced that he or she is acting rationally and taking a logical,
reasoned decision on an important topic.
 ERRORS

Indecisiveness

Postponing the decision until the last moment

A failure to isolate the root cause of the problem

A failure to assess the reliability of informational sources

The method for analysing the information may not be the sound one

Do implement the decision and follow through

THANKYOU.