Basic Decision making Models

The Basic Decision Making Models

Administrative ProcessJohn Pisapiawww.TheStrategicL;eader.org

John PisapiaAdministrative Processes

Why?The work of managers, of scientists, of engineers, of lawyers--the work that steers the course of society and its economic and governmental organizations--is largely work of making decisions and solving problems. It is work of choosing issues that require attention, setting goals, finding or designing suitable courses of action, and evaluating and choosing among alternative actions.

The first three of these activities--fixing agendas, setting goals, and designing actions--are usually called problem solving; the last, evaluating and choosing, is usually called decision making.

Herbert Simon, Nobel Laureate 1988

We all face decision making situations Life of leaders – decisions, decisions, decisions, …

•DecisionMaking Problem Solvingwww.TheStrategicLeader.org

Key concepts:

BARRIERS TO EFFECTIVE DECDISIONMAKING

Factors that influence decisions

– Choice shift – group discussion, exaggeration, extremes

– Groupthink – cohesive group seeks consensus, clouds objectivity

– Escalation of commitment – continued commitment of resources to a failing course of action

Common decision biases

– Anchoring and adjusting

– Representativeness

– Availability

– Overconfidence

– Bounded awareness

– Emotional involvement

– Self-serving reasoning

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Activity #1Match the quote with the concept

• Anchoring and adjusting• Choice shift• Groupthink• Escalation of commitment • Representativeness

• Availability• Overconfidence –

• Bounded awareness

• Emotional involvement

• Self-serving reasoning

• The first answer is the only answer and there is no other!”

• “I’m sticking to my idea!”

• “Go with the flow.”

• “It won’t fail this time if we try harder.”

• “If it looks like this, then it will happen like this!”

• “This is more important because I remember it!”

• “I’m always right!”

• “That’s not relevant to me, so forget it!”• “My friends always have great ideas!”“My

enemies always have terrible ideas!”• “If it was a good idea, then it was my idea!”“If it

was a bad idea, then it wasn’t my fault!”

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• Rational Decision Process

• Satisficing

• Muddling Through

• Recognition Primed Decision (RPD)

• Garbage Can• Leader Participation

What? Theory - The Basic Models:

The Rational Model

Satisficing ModelTheory - People are restricted in the information needed to make a decision.

Bounded rationality is present therefore select the first alternative that is minimally acceptable.

Assumptions-people:• Definition of situation and available - information is incomplete and

inadequate• Have limited information needed for decision• Engage in limited search for solutions• Settle for less optimal solutions

Actions: Managers are comfortable in making decision without first examining all alternatives accept a “good enough” decision because cost are too great otherwise –

bounded discretion use management shortcuts in making decisions


© Hoy, 2003

Muddling Through Model

Theory - Muddling is a method of successive limited comparisons; a strategy of evolution.

Assumptions

•2 types - Objectives are not necessary; objectives are necessary

•Trial and error--small incremental changes--until noise subsides.

•Make changes, compare to existing state, then decide next move.

Actions –•Small, limited set of alternatives is considered: all options are similar to the existing situation. •The decision maker decides on an option, considers the consequences, and if reasonable, then moves down that path.•If the difficulties subside, continue on that path•If the difficulties persist, then a different option is pursued and the direction changed.

Recognition Primed Decision Model (RPD))

Theory –Future oriented decision making model Quick decisions in Complex situations- Based on pattern recognition cues

Assumptions – able to:•Recognize salient features of problem•Generate possible course –•Compare to constraints of situation•Select first course of action that is not rejected.Actions If Then -- Recognize situation as typical – and know course of action - effective with experienced usersIF??? . .Then - more concerned with situation rather than CA - sees patterns that are not relevantIF - Then ??? - more concerned with action and reaction the user’s experience is too focused in one area or has been distorted by uncommon resultsIF??? – Then??? - the user lacks experience in general

Adapted from Hoy, 2003

What decision -making model should I use?

Decision Opportunity

No

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Sufficient Information?

Important?

Sufficient Time?

Important?

Important?

Important?

RPD

Muddling

Satisficing

RPD

Muddling

Sufficient Time?

Muddling

Satisficing

Rational

How?How?

Personal Take-Aways

•Every decision has a price (a.k.a. consequences)• In many cases price is obscure• Do it if you are willing to pay the price

• Process is Important

How?How?

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Take-AwaysInterpersonal Take-Aways

•When decisions affect others – impossible to please all– Whatever decision you make –

some people will be happy and some will not

– Build and maintain a trusting decision making environment – will keep the zone of acceptance broad

– Better to make a decision that is informed and satisfies your conscience

Organizational Take-Aways• Different approaches for

different situations


References• Osland, J., Kolb, D., Rubin, I., Turner, M. (2007).

Organizational Behavior: An Experiential Approach (8th ed) pp. 468-488. Upper Saddle River, NJ: Pearson Education Inc.

• Pisapia, J. (1998). Decision Making and Problem Solving. Working paper.

• Trout, J. (1999). The Power of Simplicity. New York: McGraw Hill, Inc.


Pisapia & Glick-Cuenot (2010) 14

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Basic Decision making Models