Last updated: February 24, 2019
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In the fast paced society of today where world has become a global village, managers have to deal with complex problems, immense competition, scarce resources and dynamic business environments which has made their primary job of decision making very challenging. This has made effective decision-making more difficult as well as more critical than in the past. Research has found that managers frequently plan, solve problems and make decisions based upon incomplete and sometimes inaccurate information. At worst, this may result in dire consequences for their organization (Goodman, 1993). At best, this can cause less than optimal decisions to be made, placing the organization in a less effective and competitive position than it would otherwise be. Ineffective use of information is often due to the following factors: Managers may make incorrect assumptions about or lack knowledge of, available information. They may lack the comfort, ability or inclination to access critical information because of chain of command or networking issues. Staff may be unequipped to adequately interpret existing information. Critical internal and external information and the ability to access it may be absent (Goodman, 1993).



Theories and Concepts

There are several general theories regarding management decision-making processes (Goodman, 1993). One is called process theory, in which decision-making is thought to contain an intelligence phase, in which a person initiates activity; a design phase, in which one develops alternative courses of action; and a choice phase, in which one chooses among alternatives (Saunders and Jones, 1990). This is a linear model. A second theory, which builds upon the first, is called the garbage can theory. It proposes a decision-making model which recognizes factors which “prevent a steady, undisturbed progression from one routine to another, and instead creates a dynamic, open system process subjected to interferences, feed back loops, and dead ends.” According to modern orthodox economists, rationality in decision making means “the logical application of means to attain particular ends” (Lutz & Lux, 1988). In this view, “rational economic man” chooses the one alternative that maximizes the value desired (typically his or her utility or profit). This rational decision maker single-mindedly and eagerly calculates until the optimum is determined. It is assumed that all relevant information can be reduced to a common measure of the desired value; there are no irreducible qualitative considerations (Tomer, (1992).

Theories of decision-making behavior have generally started from the notion of a decision space, e.g., a two dimensional point space in which each point represents one of the set of all possible alternatives (Simon, 1955). Let us say that none of the alternatives in this space have features going beyond the existing state of technological and organizational knowledge; all can be discovered without truly creative or innovative activity (Tomer, (1992). Of course, it is conceivable that decision makers in considering alternatives will make creative new connections between old elements and see previously unseen relationships (whether or not explicit research and development type activity is involved). This activity may make possible previously unimagined alternatives that are beyond the current state of the art. Thus, the decision space must include a third dimension in order to enclose all the possibilities that decision makers are capable of conceiving (Tomer, (1992).

Subjective expected utility (SEU) theory is the dominant theory about how rational economic man makes decisions (Tomer, (1992). In accordance with SEU theory, decision makers in a static world will select the very best alternative from the two dimensional space. As Simon (1955) and others have pointed out, this involves selecting the alternative with the maximum expected payoff taking into account knowledge of the outcomes of the alternatives, the probabilities of these outcomes and the utility or value placed on these outcomes. In a dynamic context, optimizing is in principle no different; it simply means selecting the alternative with maximum subjective expected utility from a three dimensional space, which is larger and less clearly defined than two dimensional one (Tomer, (1992).

The functions of successful general managers seem to be characterized by “long hours, fragmented episodes, and oral communication. Their behavior looks less symptomatic, more informal, less reflective, more reactive, less well organized, and more frivolous than… one…would expect.” (Kotter 1982) Their activities are neither formal nor sequential. Their most fundamental challenges are sorting out the “uncertain, diverse, and enormous amount of potentially relevant information” and “getting things done through a large and diverse set of people despite having little direct control over most of them.” (Kotter 1982)

Steps in Decision Making

To achieve best possible decision making, decision makers in the organization would have to follow the eight below to the best of their abilities (Tomer, (1992).

1.      Recognize the Need for a Decision: Opportunities, Problems and Crises;

2.      Decide about the Decision Process;

3.      Diagnosis: What are the Nature of the Issues and Problems?

4.      Survey the organizational goals and the values implicated by the choice: determine decision criteria;

5.      Search for existing alternatives and/ or design new alternatives;

6.      Evaluate the positive and negative consequences of the alternatives;

7.      Selection: Deliberate on and Make a Commitment to an Alternative; and

8.      Authorization


Selecting a Decision Strategy

It doesn’t take long for decision makers dealing with large, complex and inn-structured situations to come to the realization that the information processing activities required for optimization, or even an approximation to it, would be prohibitively expensive. For this reason, decision makers have sought ways to make their information processing tasks feasible and manageable (Tomer, (1992). They have, for example, sought decision strategies “based on rules of thumb or ‘heuristics’ [that] tend to guide the search into promising regions, so that solutions will generally be found after search of only a tiny part of the total space” (Simon, 1979).

A decision strategy consists of a procedure that utilizes rules of search, rules of choice and rules of learning (Grandori, 1984). Satisficing is a decision strategy where alternatives are examined as they become available and the first one that satisfies of the decision maker’s requirements is chosen for implementation (Tomer, (1992). Consider the rules involved in a satisficing strategy compared to the rules for an optimizing strategy (Grandori, 1984). The satisficing choice rule is to compare the consequences of each alternative to the decision maker’s aspiration level, rather than comparing directly. The satisficing search rule is based on the principle of only partially exploring the decision space, instead of generating all possible alternatives. The satisficing learning rule is to adjust aspiration levels or the set of considered alternatives depending on whether there are too many or no acceptable alternatives. The essential difference between optimizing and satisficing is the “difference between searching a haystack to find the sharpest needle in it and searching the haystack to find a needle sharp enough to sew with” (March ; Simon, 1958).


Regularizing Manager’s Decision Making

Regardless of the steps taken or strategies used in information processing, decision making will not be rational (oriented to organizational goals) unless decision makers take the organization’s goals-not their own or others’ goals-and other relevant information into account. In Administrative Behavior, Simon (1957) has developed what has come to be called the “rational man” (not the same as the rational economic man) view of the influences brought to bear by the organization and its management to insure the rationality of its members’ decision making (Tomer, (1992).

In Simon’s (1957) view, the influence of the organization is extremely important.

“Organization refers to the complex pattern of communications and other relations in a group of human beings. This pattern provides to each member of the group much of the information, assumptions, goals, and attitudes and enter into his decisions, and provides him also with a set of stable and comprehensible expectations as to what the other members of the group are doing and how they will react to what he says and does.”

The Quality of Decision Making

Suppose that in its decision making an organization always follows all the suggested information processing steps, uses appropriate strategies, and brings to bear influences that lead organizational decision makers to take organizational goals and sub-goals into account in a consistent way (Tomer, (1992). The quality of decision making in such an organizational could still be substantially below potential if the quality of individual and/or group mental activity involved in certain of the decision making steps is below potential. This leads us to inquire concerning the nature of this mental activity and the factors determining its quality. To begin, let’s consider findings from the growing amount of research on brain activity related to decision making.

Up to this point, our conception of mental activity has largely been confined to storage and retrieval of information from short-term and long-term memory as well as to calculation and logical analysis (Tomer, (1992). Recent research indicates that these functions reside in the left hemisphere of the brain but that equally important, often neglected, functions reside in the right hemisphere. Right brain activity makes possible a different form of knowing called intuition (Tomer, (1992).

The Nature of Intuition According to Frances Vaughan (1982), intuition is a psychological function–like sensation, feeling, and thinking–and thus is a way of knowing. “When we know something intuitively, it invariably has the ring of truth: yet often we do not know how we know what we know”. The intuitive function includes such phenomenon as precognition, telepathy, psychokinesis, clairvoyance, and remote viewing. People with extremely highly developed intuitive abilities are known as psychics. The average person is believed to have considerable, albeit undeveloped, intuitive ability (Tomer, 1992).

According to Agor (1984),

“Intuition, fully developed, then, is a highly efficient way of knowing. It is fast and accurate. Our system will process a wide array of information on many levels, and give us an instantaneous cue how to act. We have the answer even though we do not understand all the steps, or know fully all the information our system processed to give us this cue. The more open we are to our feelings, the more secure we become through practice in their ability to give us correct cues, and the less we project our own personal desires and wishes for a particular situation or person to be other than they really are, the more efficient our intuitive clues will become.”

According to Agor (1986), intuition is a “highly rational decision making skill–…a subspecies of logical thinking–one in which the steps of the process are hidden in the subconscious portion of the brain.” One piece of evidence in support of this comes from the research of Douglas Dean and John Mihalasky (Dean and others, 1974). They found that among presidents who were both chief executives and chief corporate decision makers for at least five years, every man who improved his company’s profits by 100 percent or more scored above average in the precognition test they administered, a remarkable correlation between high profit making and precognition, the ability to predict future events (Tomer, (1992).

Similarly, Agor (1986) finds that “when executives in top management positions who also score in the top 10 percent in intuitive ability are tested, the results overwhelmingly indicate that these executives do use their brain skill to guide their most important decisions.”

Critical tasks in the strategic decision-making process for groups have been identified as environmental scanning, environmental interpretation, strategy formulation and strategic implementation (Goodman, 1993). Environmental scanning, which is of importance to this discussion, includes monitoring the environment for evidence of trends and incidents which could seriously impact organizational performance (Goodman, 1993).



Decision making may be viewed as one stage of a problem solving process that is preceded by clarification of goals and values and followed by implementation (Tomer, (1992). An organization’s decision-making activity could benefit or detract from these other stages. For example, highly participative decision-making processes are known to build member commitment to the decisions made. Similarly, insights stemming from decision-making deliberations may contribute to clarification of the organization’s goals and values, thereby benefiting the earlier stage. However, as the results show that there are several constraints in which managers have to make critical decisions, in the absence of which there is a possibility that scenarios can change. Although not considered above, a complete theory should consider the possibility of these “spillovers.” (Tomer, (1992)



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Agor, W.H. (1986). The logic of intuitive decision making: A research-based approach for top management. New York: Quorum Books.

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Vaughan, F.E. (1982). What Is Intuition? New Realities (Spring): 16-22.