Rational Decision Making

Posted on May 14 2009

Rational Decision Making

Rational decision making is the systematic analysis of a problem and choice of a solution. Rational Decision Making can be simplistically described as a 2 stage process – the first being problem identification and the second in problem solution.

Also known as the Eight Step Decision Model, it can be further broken down into 8 steps.

Problem Identification –assess the decision environment –define the decision problem –specify decision objectives –diagnose the problem

Problem Solution –develop alternative solutions –evaluate alternatives –choose the best alternative –implement the chosen alternative

Alternative courses of action are considered and the one is chosen and implemented is called the problem solution or decision.

Often decisions are bounded by rationality. There is a limited time allowed for the decision, limited information or resources are available.

Bounded rationality perspective explains the importance and pervasiveness of intuitive decision making, based on experience and gut feelings, rather than a logical sequence of steps. Often there are complex or multidimensional issues.

A trade-off must be made to find a high-quality decision alternative, so a proven, or programmed decision is made. A programmed decision is one which is repetitive, well defined, and procedures exist to find a solution.

The non-programmed decision is poorly defined, and no procedure exists for finding a solution. Trade offs and constraints must be considered. Organizational constraints may exist when agreement is needed, a shared perspective is required, as well as cooperative decision making.

Support and the corporate culture must be considered. Structure and ethical values place a big force on the decision made, so the highest quality decision will be a cooperatively made one, or Group Decision Making

Trade offs for personal constraints are made in both cases. Desire for prestige, success and a personal Decision Style, as well as a need to satisfy emotional needs and cope with pressure are present

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