Decision Making Approach: Rational, Behavioural, Practical & Personal

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Decision Making Approaches: Rational, Behavioural, Practical & Personal

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Approaches to Decision Making – Rational, Behavioural, Practical & Personal:

Approaches to Decision Making – Rational, Behavioural , Practical & Personal Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt) Professor Al-Qurmoshi Institute of Business Management Hyderabad

Approaches to Decision Making:

Approaches to Decision Making The following are the four types of Approaches to Decision Making: Rational - This approach is appealing as it is logical and economical. Behavioural - This approach attempts to account for the limits on rationality in decision-making. Practical - This approach combines features of the rational and behavioural approaches. Personal – T his approach focuses on decision-making processes individuals use in difficult situations.

Rational Decision Making Approach:

Rational Decision Making Approach Rational decision-making approach is a systematic, step-by-step process for making decisions. It assumes that the organization is economically based and managed by decision-makers who are absolutely objective and have complete information.

Steps in Rational Decision Making Approach:

Steps in Rational Decision Making Approach The following are the steps in rational decision-making: (1) State the Situational Goal, (2) Identify the Problem, (3) Determine Decision Type, (4) Generate Alternatives, (5) Evaluate Alternatives, (6) Choose an Alternative, (7) Implement the Plan and (8) Control.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (1) State the Situational Goal A goal is stated for a particular situation. It can be used as a standard in determining the decision to be made later on. (2) Identify the Problem: The problem requiring decision is recognized and diagnosed. It involves understanding the nature, magnitude and causes of the problem. The purpose of problem identification is to collect information that has a bearing on the goal. If there is a discrepancy between the actual situation and the goal, action may be required. The constraints within which the problem must be solved are also defined.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (3) Determining Decision Type: Now decision- makers must determine if the problem requires a programmed or a non-programmed decision. If a programmed decision is required, an appropriate decision rule is invoked and a choice is made from the available alternatives. (4) Generate Alternatives: Alternatives are generated by decision maker on the basis of the academic & professional education, experience and knowledge about the situation. Information may be sought from colleagues, subordinates, experts and superiors. Decision-makers may analyze the symptoms of the problems for clues or rely on their own intuition or judgement to generate alternative solutions.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (5) Evaluate Alternatives: Each alternative is assessed based on its Strengths & weaknesses, costs & benefits, as well as, possible negative consequences keeping in mind predetermined decision criteria. The positive consequences must be weighed against negative consequences. The ultimate decision criterion is whether a particular decision will bring the decision maker nearer to goal. The evaluation process usually includes: (a) Describing the anticipated outcomes of each alternative, (b) Evaluating the anticipated costs of each alternative, and (c) Estimating the uncertainties and risks associated with each alternative.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (6) Choose an Alternative: It involves selecting the best alternative with maximum positive consequences, least or no negative outcomes, less risks and minimum costs. The expected value of each alternative is determined and the alternative with the largest expected values is selected. It is important to consider contingency plans. Contingency plans are alternative actions to take if the primary course of action is unexpectedly disrupted or rendered inappropriate. Planning for contingencies is part of the transition between choosing the preferred alternative and implementing it.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (7) Implementing the Plan: Once a decision is formally accepted, an authorisation is made for its implementation. Implementation puts the decision into action and involves communicating the decision, gathering support for and acquiring and assigning resources to ensure that it is carried out. It builds on the commitment and motivation of those involved in the decision-making process. Successful implementation requires appropriate use of resources and good management skills, leadership characteristics, reward structure & knowledge and application of group dynamics.

Steps in Rational Decision Making Approach (Contd.):

Steps in Rational Decision Making Approach (Contd.) (8) Control: This is the final stage of rational decision-making process, wherein, the outcomes of the decision are measured and compared with the predetermined, desired goals. If there is a discrepancy between the two, the decision-maker may restart the process of decision-making by revising/modifying/setting new goals.

Strengths and Weaknesses of the Rational Approach:

Strengths and Weaknesses of the Rational Approach This approach has several strengths. It forces the decision-maker to consider a decision in a logical, sequential manner and an in-depth analysis of alternatives helps him to choose on the basis of information rather than personal prejudices, emotions or social pressure. Its weaknesses are that the manager does not always have perfect information, faces time and financial constraints, may have limited ability to process information and may not be able to predict future accurately. Also, all the alternatives cannot be quantified making comparisons difficult.

Behavioural Approach:

Behavioural Approach This approach assumes that decision-makers operate with bounded rationality rather than with the perfect rationality assumed by the rational approach. Bounded rationality is the idea that decision makers cannot deal with information about all the aspects and alternatives pertaining to a problem and therefore choose to tackle some meaningful subset of it. This process is neither exhaustive nor completely rational and therefore, solutions arrived at are not entirely ideal. Decision-makers operating with bounded rationality limit the inputs to the decision-making process, focus their attention on two or three most favourable alternatives, process these in great detail and base their decisions on judgement and personal biases as well as logic.

Features in Behavioural Approach :

Features in Behavioural Approach This approach possesses the following features: (i) Use of procedures and rules of thumb which reduce uncertainty in decision-making initially. (ii) Sub optimizing which refers to knowingly accepting less than the best possible outcome to avoid unintended negative effects on other aspects of the organization. (iii) “ Satisfying refers to examining alternatives only until a solution that meets minimal requirements is found and then making no further efforts to look for a better one. The search for alternatives is generally a sequential process based on procedures and rules of thumb guided by previous experiences with similar problems. Such a solution may not always be the optimal solution since the search often ends when the first minimally acceptable alternative is identified.

Practical Approach:

Practical Approach This approach combines the steps of the rational approach with the features and conditions of the behavioural approach to create a more realistic process for making decisions. The decision-maker try to go beyond rules of thumb satisfying limitations, generate as many alternatives as possible within the given time, money and other practicalities of the situation. Managers who have tendency to jump from one decision to another, making decisions hastily and impulsively usually do not use much information.

Personal Approach:

Personal Approach Personal Approach helps in decision making when decision makers are nervous, anxious, worried or agitated. Personal approach deals with the personal conflicts that people experience in particularly difficult decision situations.

Basic Characteristics of Personal Approach :

Basic Characteristics of Personal Approach The Personal Approach has five basic characteristics: (a) It deals with important life decisions , such as, choosing the nature and type of education & institution, career, marriage and major organizational decisions. (b) It recognizes that procrastination and rationalization are mechanisms by which people avoid taking difficult decisions and coping with the accompanying stress. (c) It explicitly acknowledges that some decisions could possibly go wrong. (d) It provides for self-reactions in terms of comparisons of alternatives with internalized moral standards. (e) It recognizes that at times the decision-maker is uncertain about alternative courses of action. This kind of situation makes it difficult for him to give a whole-hearted commitment to one single decision.

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