How does decision making process work

The first step, therefore, has already been completed—we know that you want to buy a new car. How many passengers do you want to accommodate? How important is fuel economy to you? Is safety a major concern? All of the potential options for purchasing your car will be evaluated against these criteria. Before we can move too much further, you need to decide how important each factor is to your decision in step 3.

If each is equally important, then there is no need to weight them, but if you know that price and gas mileage are key factors, you might weight them heavily and keep the other criteria with medium importance.

Step 4 requires you to generate all alternatives about your options. Then, in step 5, you need to use this information to evaluate each alternative against the criteria you have established. You choose the best alternative step 6 and you go out and buy your new car step 7. Of course, the outcome of this decision will be related to the next decision made; that is where the evaluation in step 8 comes in.

For example, if you purchase a car but have nothing but problems with it, you are unlikely to consider the same make and model in purchasing another car the next time!

While decision makers can get off track during any of these steps, research shows that limiting the search for alternatives in the fourth step can be the most challenging and lead to failure. Conversely, successful managers are clear about what they want at the outset of the decision-making process, set objectives for others to respond to, carry out an unrestricted search for solutions, get key people to participate, and avoid using their power to push their perspective.

The rational decision-making model has important lessons for decision makers. First, when making a decision you may want to make sure that you establish your decision criteria before you search for all alternatives. This would prevent you from liking one option too much and setting your criteria accordingly. You may come across a car that you think really reflects your sense of style and make an emotional bond with the car.

Then, because of your love for this car, you may say to yourself that the fuel economy of the car and the innovative braking system are the most important criteria. After purchasing it, you may realize that the car is too small for all of your friends to ride in the back seat when you and your brother are sitting in front, which was something you should have thought about! Setting criteria before you search for alternatives may prevent you from making such mistakes.

Another advantage of the rational model is that it urges decision makers to generate all alternatives instead of only a few. By generating a large number of alternatives that cover a wide range of possibilities, you are likely to make a more effective decision in which you do not need to sacrifice one criterion for the sake of another.

Despite all its benefits, you may have noticed that this decision-making model involves a number of unrealistic assumptions. It assumes that people understand what decision is to be made, that they know all their available choices, that they have no perceptual biases, and that they want to make optimal decisions. Think about how you make important decisions in your life. Our guess is that you rarely sit down and complete all eight steps in the rational decision-making model.

For example, this model proposed that we should search for all possible alternatives before making a decision, but this can be time consuming and individuals are often under time pressure to make decisions.

Moreover, even if we had access to all the information, it could be challenging to compare the pros and cons of each alternative and rank them according to our preferences. Anyone who has recently purchased a new laptop computer or cell phone can attest to the challenge of sorting through the different strengths and limitations of each brand, model, and plans offered for support and arriving at the solution that best meets their needs.

In fact, the availability of too much information can lead to analysis paralysis , where more and more time is spent on gathering information and thinking about it, but no decisions actually get made. For example, if you are looking to purchase a house, you may be willing and able to invest a great deal of time and energy to find your dream house, but if you are looking for an apartment to rent for the academic year, you may be willing to take the first one that meets your criteria of being clean, close to campus, and within your price range.

The bounded rationality model of decision making recognizes the limitations of our decision-making processes. According to this model, individuals knowingly limit their options to a manageable set and choose the best alternative without conducting an exhaustive search for alternatives. An important part of the bounded rationality approach is the tendency to satisfice , which refers to accepting the first alternative that meets your minimum criteria.

For example, many college graduates do not conduct a national or international search for potential job openings; instead, they focus their search on a limited geographic area and tend to accept the first offer in their chosen area, even if it may not be the ideal job situation.

Satisficing is similar to rational decision making, but it differs in that rather than choosing the best choice and maximizing the potential outcome, the decision maker saves time and effort by accepting the first alternative that meets the minimum threshold. The intuitive decision-making model has emerged as an important decision-making model. It refers to arriving at decisions without conscious reasoning. When we recognize that managers often need to make decisions under challenging circumstances with time pressures, constraints, a great deal of uncertainty, highly visible and high-stakes outcomes, and within changing conditions, it makes sense that they would not have the time to formally work through all the steps of the rational decision-making model.

Yet when CEOs, financial analysts, and healthcare workers are asked about the critical decisions they make, seldom do they attribute success to luck. To an outside observer, it may seem like they are making guesses as to the course of action to take, but it turns out that they are systematically making decisions using a different model than was earlier suspected.

Research on life-or-death decisions made by fire chiefs, pilots, and nurses finds that these experts do not choose among a list of well-thought-out alternatives. Instead, they consider only one option at a time. The intuitive decision-making model argues that, in a given situation, experts making decisions scan the environment for cues to recognize patterns.

Once a pattern is recognized, they can play a potential course of action through to its outcome based on their prior experience. Due to training, experience, and knowledge, these decision makers have an idea of how well a given solution may work.

If they run through the mental model and find that the solution will not work, they alter the solution and retest it before setting it into action. If it still is not deemed a workable solution, it is discarded as an option and a new idea is tested until a workable solution is found. Once a viable course of action is identified, the decision maker puts the solution into motion.

The key point is that only one choice is considered at a time. Novices are not able to make effective decisions this way because they do not have enough prior experience to draw upon. In addition to the rational decision making, bounded rationality models, and intuitive decision making, creative decision making is a vital part of being an effective decision maker. Creativity is the generation of new, imaginative ideas. With the flattening of organizations and intense competition among organizations, individuals and organizations are driven to be creative in decisions ranging from cutting costs to creating new ways of doing business.

Please note that, while creativity is the first step in the innovation process, creativity and innovation are not the same thing. Innovation begins with creative ideas, but it also involves realistic planning and follow-through. The five steps to creative decision making are similar to the previous decision-making models in some keys ways. All of the models include problem identification , which is the step in which the need for problem solving becomes apparent.

If you do not recognize that you have a problem, it is impossible to solve it. Immersion is the step in which the decision maker thinks about the problem consciously and gathers information.

A key to success in creative decision making is having or acquiring expertise in the area being studied. Concentrate on the problem at hand.

This rule keeps the discussion very specific and avoids the group's tendency to address the events leading up to the current problem. Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there are no bad ideas. Encouragement of the group to freely offer all thoughts on the subject is important. Participants should be encouraged to present ideas no matter how ridiculous they seem, because such ideas may spark a creative thought on the part of someone else.

Refrain from allowing members to evaluate others' ideas on the spot. All judgments should be deferred until all thoughts are presented, and the group concurs on the best ideas. Although brainstorming is the most common technique to develop alternative solutions, managers can use several other ways to help develop solutions. Here are some examples:. Nominal group technique. It also avoids some of the pitfalls, such as pressure to conform, group dominance, hostility, and conflict, that can plague a more interactive, spontaneous, unstructured forum such as brainstorming.

Delphi technique. With this technique, participants never meet, but a group leader uses written questionnaires to conduct the decision making. No matter what technique is used, group decision making has clear advantages and disadvantages when compared with individual decision making.

The following are among the advantages:. Opportunities for discussion help to answer questions and reduce uncertainties for the decision makers. Individuals become guilty of groupthink — the tendency of members of a group to conform to the prevailing opinions of the group. Groups may have difficulty performing tasks because the group, rather than a single individual, makes the decision, resulting in confusion when it comes time to implement and evaluate the decision. So, are two or more heads better than one?

The answer depends on several factors, such as the nature of the task, the abilities of the group members, and the form of interaction. Because a manager often has a choice between making a decision independently or including others in the decision making, she needs to understand the advantages and disadvantages of group decision making. The purpose of this step is to decide the relative merits of each idea. Managers must identify the advantages and disadvantages of each alternative solution before making a final decision.

Weight each factor important in the decision, ranking each alternative relative to its ability to meet each factor, and then multiply by a probability factor to provide a final value for each alternative. Effective executives know when a decision has to be based on principle and when it should be made pragmatically, on the merits of the case.

They know the trickiest decision is that between the right and the wrong compromise, and they have learned to tell one from the other. They know that the most time-consuming step in the process is not making the decision but putting it into effect.

Unless a decision has degenerated into work, it is not a decision; it is at best a good intention. This means that, while the effective decision itself is based on the highest level of conceptual understanding, the action commitment should be as close as possible to the capacities of the people who have to carry it out.

Above all, effective executives know that decision making has its own systematic process and its own clearly defined elements. Indeed, every decision is a risk-taking judgment. But unless these elements are the stepping stones of the decision process, the executive will not arrive at a right, and certainly not at an effective, decision.

Therefore, in this article I shall describe the sequence of steps involved in the decision-making process. Classifying the problem. Is it generic? Is it exceptional and unique? Or is it the first manifestation of a new genus for which a rule has yet to be developed?

Specifying the answer to the problem. What will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable? Building into the decision the action to carry it out. What does the action commitment have to be? Who has to know about it?

Testing the validity and effectiveness of the decision against the actual course of events. How is the decision being carried out? Are the assumptions on which it is based appropriate or obsolete? The effective decision maker asks: Is this a symptom of a fundamental disorder or a stray event? The generic always has to be answered through a rule, a principle.

But the truly exceptional event can only be handled as such and as it comes. Strictly speaking, the executive might distinguish among four, rather than between two, different types of occurrences. First, there is the truly generic event, of which the individual occurrence is only a symptom. The problem is generic. This is even more likely to be true of occurrences within manufacturing organizations.

For example:. A product control and engineering group will typically handle many hundreds of problems in the course of a month. Yet, whenever these are analyzed, the great majority prove to be just symptoms—and manifestations—of underlying basic situations. The individual process control engineer or production engineer who works in one part of the plant usually cannot see this.

Only when the total workload of the group over several months is analyzed does the generic problem appear. Then it is seen that temperatures or pressures have become too great for the existing equipment and that the couplings holding the various lines together need to be redesigned for greater loads. Until this analysis is done, process control will spend a tremendous amount of time fixing leaks without ever getting control of the situation. The second type of occurrence is the problem which, while a unique event for the individual institution, is actually generic.

The company that receives an offer to merge from another, larger one, will never receive such an offer again if it accepts. This is a nonrecurrent situation as far as the individual company, its board of directors, and its management are concerned. But it is, of course, a generic situation which occurs all the time. Thinking through whether to accept or to reject the offer requires some general rules.

For these, however, the executive has to look to the experience of others. The huge power failure that plunged into darkness the whole of Northeastern North America from St. Lawrence to Washington in November was, according to first explanations, a truly exceptional situation. So was the thalidomide tragedy which led to the birth of so many deformed babies in the early s. The probability of either of these events occurring, we were told, was one in ten million or one in a hundred million, and concatenations of these events were as unlikely ever to recur again as it is unlikely, for instance, for the chair on which I sit to disintegrate into its constituent atoms.

Truly unique events are rare, however. Whenever one appears, the decision maker has to ask: Is this a true exception or only the first manifestation of a new genus? And this—the early manifestation of a new generic problem—is the fourth and last category of events with which the decision process deals.

We know now that both the Northeastern power failure and the thalidomide tragedy were only the first occurrences of what, under conditions of modern power technology or of modern pharmacology, are likely to become fairly frequent occurrences unless generic solutions are found. All events but the truly unique require a generic solution. They require a rule, a policy, or a principle. Once the right principle has been developed, all manifestations of the same generic situation can be handled pragmatically—that is, by adaptation of the rule to the concrete circumstances of the case.

Truly unique events, however, must be treated individually. The executive cannot develop rules for the exceptional. The effective decision maker spends time determining which of the four different situations is happening. The wrong decision will be made if the situation is classified incorrectly.

By far the most common mistake of the decision maker is to treat a generic situation as if it were a series of unique events—that is, to be pragmatic when lacking the generic understanding and principle. The inevitable result is frustration and futility. This was clearly shown, I think, by the failure of most of the policies, both domestic and foreign, of the Kennedy Administration.

For all the brilliance of its members, the Administration achieved fundamentally only one success, and that was in the Cuban missile crisis. Otherwise, it achieved practically nothing. Equally common is the mistake of treating a new event as if it were just another example of the old problem to which, therefore, the old rules should be applied:.

This was the error that snowballed the local power failure on the New York—Ontario border into the great Northeastern blackout. The power engineers, especially in New York City, applied the right rule for a normal overload. Yet their own instruments had signaled that something quite extraordinary was going on which called for exceptional, rather than standard, countermeasures.

By contrast, the one great triumph of President Kennedy in the Cuban missile crisis rested on acceptance of the challenge to think through an extraordinary, exceptional occurrence. As soon as he accepted this, his own tremendous resources of intelligence and courage effectively came into play.

Once a problem has been classified as generic or unique, it is usually fairly easy to define. But only the truly effective decision makers are aware that the danger in this step is not the wrong definition; it is the plausible but incomplete one.

The American automobile industry held to a plausible but incomplete definition of the problem of automotive safety. It was this lack of awareness—far more than any reluctance to spend money on safety engineering—that eventually, in , brought the industry under sudden and sharp Congressional attack for its unsafe cars and then left the industry totally bewildered by the attack.

It simply is not true that the industry has paid scant attention to safety. On the contrary, it has worked hard at safer highway engineering and at driver training, believing these to be the major areas for concern.