MODELS OF DECISION MAKING

In previous article (Decision making process) you have learnt what the different phases of a decision making process are, what types of decisions you are likely to make in an organisation and under what states of nature these decisions are made. Now, we are going to examine three suggested models of the decision making process which will help you to understand how decisions are made and should be made. These three models are:

(1) The econologic model, or the economic man,

(2) The bounded rationality model or the administrative man; and

(3) The implicit favorite model or the game man.

You will notice that each model differs on the assumptions it makes about the person or persons making the decision.

1) Econologic Model or Economic Man Model

The econologic model represents the earliest attempt to model decision process. Briefly, this model rests on two assumptions: (1) It assumes people are economically rational; and (2) that people attempt to maximise outcomes in an orderly and sequential process. Economic rationality, a, basic concept in many models of decision making, exists when people attempt to maximise objectively measured advantage, such as money or units of goods produced. That is, it is assumed that people will select the decision or course of action that has the greatest advantage or payoff from among the many alternatives. It is also assumed that they go about this search in a planned, orderly, and logical fashion.

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DECISION MAKING PROCESS

Making decisions has been identified as one of the primary responsibilities of any manager. Decisions may involve allocating resources, appointing people, investing capital or introducing new products. If resources like men, money, machines, materials, time and space were abundant, clearly any planning would be unnecessary. But, typically, resources are scarce and so there is a need for planning. Decision making is at the core of all planned activities. We can ill afford to waste scarce resources by making too many wrong decisions or by remaining indecisive for too long a time.

THREE PHASES IN DECISION MAKING PROCESS

You can define decision making as the process of choosing between alternatives to achieve a goal. But if you closely look into this process of selecting among available alternatives, you will be able to identify three relatively distinct stages. Put into a time framework, you will find:

1. The past, in which problems developed, information accumulated, and the need for a decision was perceived;

2. The present, in which alternatives are found and the choice is made; and

3. The future, in which decisions will be carried out and evaluated.

Herbert Simon, the well-known Nobel laureate decision theorist, described the activities associated with three major stages in the following way:

1. Intelligence Activity: Borrowing from the military meaning of intelligence Simon describes this initial phase as an attempt to recognise and understand the nature of the problem, as well as search for the possible causes;

2. Design Activity: During the second phase, alternative courses of action are developed and analyzed in the light of known constraints; and

3. Choice Activity: The actual choice among available and assessed alternatives is made at this stage.

If you have followed the nature of activities of these three phases, you should be able to see why the quality of any decision is largely influenced by the thoroughness of the intelligence and design phases. Henry Mintzberg and some of his colleagues (1976) have traced the phases of some decisions actually taken in organisations. They have also come up with a three-phase model as shown in Figure I.

Figure I: Mintzberg's empirically based phases of decision making in organizations

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