Decision making

Making decision: The role of Bounded

Rationality model
• A more realistic approach to describing how managers make decisions
is the concept of bounded rationality, which says that managers make
decisions rationally, but are limited (bounded) by their ability to process
information.
• Since not possible analyze all information on all alternatives, managers
satisfice, rather than maximize. Accept the decision that is good enough
• Herbert Simon
• The rationality of decision is limited to
• The extent of the decision makers mental ability
• External influences over which the decision maker has little control or no control
Decision making is influenced by
• Decision making is also likely influenced by
• Organization’s culture
• Internal politics
• Power considerations
• Escalation of commitment( an increased commitment to a previous
decision despite evidence that it may have been wrong)
Making decision : The role of Intuition
• An unconscious process created out of distilled experience
• Making decisions on the basis of experience, feelings and
accumulated judgment
Conditions favoring intuitive decisions
• A high level of uncertainty
• Little precedent to draw on
• Variables are less scientifically predictable
• Facts are limited
• Facts do not guide or point the way
• Analytical data is of little use
• Several plausible alternatives exist
• Time is limited and pressing for right decision
Intuitive Decision making
• Intuitive decision making can complement both rational and bounded
rational decision making.
• First of all, a manager who has had experience with a similar type of
problem or situation often can act quickly with what appears to be
limited information because of that past experience.
• In addition, a recent study found that individuals who experienced
intense feelings and emotions when making decisions actually achieved
higher decision-making performance, especially when they understood
their feelings as they were making decisions. The old belief that managers
should ignore emotions when making decisions may not be the best
advice.
Making Decisions: The Role of Evidence-
Based Management
• “Any decision making process is likely to be enhanced through the use
of relevant and reliable evidence”
• That’s the premise behind evidence-based management (EBMgt),
which is the “systematic use of the best available evidence to improve
management practice.”
Elements of EBMgt
• The four essential elements of EBMgt are the decision maker’s expertise
and judgment
• external evidence that’s been evaluated by the decision maker
• opinions, preferences, and values of those who have a stake in the decision
• and relevant organizational (internal) factors such as context, circumstances
• organizational members.
The strength or influence of each of these elements on a decision will vary with each
decision
The key for managers is to recognize and understand the mindful, conscious choice as
to which element(s) are most important and should be emphasized in making a
decision.