- Describe the decision making process
“To be or not to be: that is the question.” Hamlet lamented.
“Should I stay or should I go now?” The Clash asked.
“Two roads diverged in a yellow wood,” Robert Frost pointed out.
If you’re struggling to make a decision, you’re in good company. Literature, poetry and pop culture provide plenty of sympathy for your plight. Sadly, while they understand your pain, they don’t always sing you to the correct resolution. When it comes to making a decision, in business or in life, how can you be sure you’re doing the right thing?
Well, we wouldn’t be writing songs about making decisions if it were an easy task. That said, researchers have studied the decision-making process as much as anything else, and they’ve come away with some different ideas and models that help us understand how we can make decisions more carefully and successfully. Let’s take a look at the five best known of those decision making models.
Rational Decision Making
The rational decision making model assumes decisions are based on an objective, orderly, structured information gathering and analysis. The model encourages the decision maker to understand the situation, organize and interpret the information, and then take action. There are eight steps in the rational decision making process:
Bad Hotel REviews
Let’s say that you’re the general manager at a nice hotel. Suddenly, you notice that customers are rating your property two and three stars instead of the customary five stars you and the team are used to earning. You need to make a decision about next steps to solve this issue. Let’s start right at the top of the rational decision making model.
- Understand the issue. The issue is clear to you. Customers are rating their experience at your property online, and they’re not happy. This will surely damage your team’s efforts to generate new business. You need to find a way to earn better customer ratings.
- Define the problem. You and your team sit down and read the last twenty or thirty customer reviews on three different travel sites. It turns out that customers’ unhappiness coincides with a recent increase in rates. They no longer feel they’re getting good value for their money.
- Define the objectives. What criteria will your solution have to meet? Clearly, you want to start getting better ratings from customers. You don’t want to see customers complaining about anything online. Your objective is 100% happiness, 100% five-star ratings.
- Diagnose the problem. This is the stage where you look to determine and understand the root causes of your issue. Perhaps you decide that all customer-facing staff report daily on quality issues. And maybe you consult with operations on additional perks that can be incorporated into the guest experience without giving away too much margin.
- Develop alternatives. You ultimately want to create a lengthy list of alternatives and not decide on one too quickly. You look over your employees’ reports on quality. You wait on operations for recommendations on extra perks. You collect all the data.
- Evaluate alternatives. Once you have all your alternatives on the table, you can start to make a choice. Every employee suggestion, every operations recommendation should be in front of you, and you consider each option carefully.
- Select an alternative. One of your employees has suggested two additional members for the housekeeping staff, as the current level of staff is having difficulty keeping up with the increase precipitated by an office building opening up down the street. A member of your operations team has suggested providing a continental breakfast for business travelers in response to the increase in that customer type. Both seem like good ideas. Which will provide the bigger impact?
- Implement alternative. You decide to hire the two additional members for the housekeeping staff, understanding that your customers view quality in clean rooms and common spaces. You get the budget approved and post for those two jobs. You make a plan to check in at the thirty day mark to see if customers’ ratings have improved.
The goal of the rational decision making model is to eliminate possibilities for error and biases. It assumes the following:
- Managers have all the information about the situation.
- Managers are aware of all alternative options and are equipped to evaluate them properly.
- Managers are looking to make the best possible decision.
- Managers are capable of eliminating misperceptions and biases.
- There are no cost or time constraints.
In a perfect world, where all of those assumptions are met, this model is how the decision making process works best. But we know that those assumptions can’t all be met. And that’s why we have the bounded rationality model.
Bounded Rationality Model
The bounded rationality model assumes numerous organizational and individual factors restrict rational decision making. This is the version of decision making that occurs most often in organizations, because the assumptions of this model are much closer to the truth:
- Early alternatives and solutions are quickly adopted because of perceptual limitations.
- Managers often don’t have access to all the information they need.
- Managers are not aware of all the alternatives and can’t predict the consequences of each one.
- Organizational goals constrain decisions.
- Conflicting goals of multiple stakeholders can force a compromise of a decision.
Because a human being is limited in the amount of information he or she can process, when a complex decision needs to be made, he or she will reduce the problem to a manageable size. By limiting the number of choices and the amount of necessary information, the product is a decision that’s acceptable and satisfactory. This is sometimes referred to as the Satisficing model.
In the bounded rationality model, the same steps are used in the decision making process, only instead of reviewing all information and all alternatives, those aspects are limited to the amount the decision maker is willing to gather.
Linear Model of Decision Making
Linear decision making involves listing positive and negative factors of each decision alternative. If you’ve ever made a list of pros and cons around a certain decision, then you’ve embarked on linear decision making.
In order for it truly to be linear decision making, the decision maker must then assign a numerical “weight” to each of his pros and cons, and arrive at a total score for each side. For instance, let’s say you were trying to decide if you should or should not hire a very experienced but very expensive candidate for a position in your office. Your linear decision making model might look like this:
|Reasons to Hire Candidate||Reasons to Not Hire Candidate|
|Very experienced in an area where it’s difficult to find experience||3||Another candidate might be able to be hired cheaply and trained||–2|
|Would not lose as much productivity because candidate has experience||3||Wouldn’t be promoting from within but rather hiring from outside||–3|
|Candidate would be a good fit with the group culturally speaking||1||Candidate has done some job hopping recently||–3|
|Searching for another qualified candidate, even if he has to be trained, may take a while.||2||Did not impress all the managers that interviewed him.||–3|
You’ve assigned the most important reasons a 3 on the positive side, and a –3 for the most important reason on the negative side. This makes it easy for you to tally up both sides and add them together. A positive score suggests you should hire the candidate, and a negative score suggests you should not. Looks like you’re not hiring this candidate!
Intuitive Decision Making
Intuitive decision making is a model that assumes managers make decisions by relying on past experience and their personal assessment of a situation. This model of decision making is often used when there are high levels of uncertainty or complexity around a particular problem, or when the decision is novel and the managers don’t have past experience with this kind of problem.
If managers are faced with uncertain, complex situations and they can’t get the right information to make a good decision quickly, they are apt to rely on hunches and intuition. Given the choice between this model and a linear model (like the one discussed above), managers should reach for the linear model.
Garbage Can Model
The garbage can model is one where managers use information about problems, participants, solutions and opportunities haphazardly to generate ideas and potential decisions. Unlike the other decision making models we discussed, the garbage can model does not always lead to satisfactory solutions, because the problem does not always precede alternatives and solutions.
For instance, the corporate office of an organization might have been recently informed of the benefits of going to an “open environment” where people can talk and collaborate freely. Senior management may get behind this idea and start looking for ways to knock down cube walls and make their environment more collaborative before it’s even been determined that their office has issues being collaborative.
As you can see in Figure 2, there is no sequence of steps the way there is in rational decision making, but rather the decision comes by looking at independent streams of events.
These are five well-known models for decision making. Now we’re going to take a look at some of the rules and biases in decision making that, when you’re aware of them, will lead you to stronger decision making skills.