Models of Decision Making

Models of Decision
Making
Classical, Administrative , Herbert Simon Models
Introduction
• The decision-making process though a logical one is a difficult task. All decisions
can be categorized into the following three basic models.
• (1) The Rational/Classical Model.
• (2) The Administrative or Bounded Rationality Model.
• (3) The Retrospective Decision-Making Model.
. The Rational/Classical Model
• A classical decision model is a prescriptive approach that guides management on how it

should make a decision. It rests on the assumption that managers are logical and rational
and that they make decisions that are in the best interest of the organization.
• Features of Classical Model:
• i) Decision-makers have complete information about the decision situation and possible
alternatives,
• ii) They can effectively eliminate uncertainty to achieve a decision condition of certainty,
• iii) They evaluate all aspects of the decision situation logically and rationally.
• However, these conditions rarely, if ever, actually exist. This model may be represented in
the following diagram:
Bounded Rationality Model or Administrative Model
• Decision-making involve the achievement of a goal. Rationality demands that the

decision-maker should properly understand the alternative courses of action for
reaching the goals.
• He should also have full information and the ability to analyse properly various
alternative courses of action in the light of goals sought. There should also be a
desire to select the best solutions by selecting the alternative which will satisfy the
goal achievement.
• Herbert A. Simon defines rationality in terms of objective and intelligent action. It
is characterised by behavioural nexus between ends and means. If appropriate
means are chosen to reach desired ends the decision is rational.
• Bounded Rationality model is based on the concept developed by Herbert Simon.
This model does not assume individual rationality in the decision process.
• Features
• i) Have incomplete and imperfect information,
• (ii) Are constrained by bounded rationality, and
• (iii) Tend to satisfies when making decisions.
• Instead, it assumes that people, while they may seek the best solution, normally
settle for much less, because the decisions they confront typically demand greater
information, time, processing capabilities than they possess. They settle for
“bounded rationality or limited rationality in decisions. This model is based on
certain basic concepts:
a. Sequential Attention to alternative solution:
• Normally it is the tendency for people to examine possible solution one at a time
instead of identifying all possible solutions and stop searching once an acceptable
(though not necessarily the best) solution is found.
b. Heuristic:
• These are the assumptions that guide the search for alternatives into areas that
have a high probability for yielding success.
c. Satisficing:
• Herbert Simon called this “satisficing” that is picking a course of action that is
satisfactory or “good enough” under the circumstances. It is the tendency for
decision makers to accept the first alternative that meets their minimally
acceptable requirements rather than pushing them further for an alternative that
produces the best results.
• Satisficing is preferred for decisions of small significance when time is the major
constraint or where most of the alternatives are essentially similar.
Herbert Simon’s Decision Making Theory
• Herbert Simon is also a great contributor of administrative theory and is regarded as the first Behaviourist.
• The human relations were considered as the first Behaviourists but it was not fully developed and it was not recognised as such.
• According to Simon administration/management requires an enquiry into how decisions are made and tasks performed and was the
essential process of organisational action.
• In his book ‘Administrative Behaviour’ he argued that ‘ making a decision is really making a choice between alternative courses of
action or even between action and non-action’.
• His theory has directed the scholars to study the importance of decisions and how they are made.
• He states that there can never be a ‘one best course of action or decision’ as stated by Classical Theorists as in reality an
administrator can never have all the complete information and knowledge to do so and there will always be a better course of action
which he is not aware of.
• And so he takes a decisions based on principles of bounded rationality or limitations of human capacity in solving complex problems.
• Such limitations arise from internal or psychological facts of stress or motivations on one hand or external,environmental factors on
the other hand.
• And thus, the decision taken by an administrative man is ‘satisficing’ that is satisfying and sufficing rather than maximising for the
situation and ‘best choice’ as per his knowledge.
STAGES IN DECISION MAKING:
• Intelligence Activity Stage: This stage identifies the problems of an organisation and the head
of the organisation has to analyse and understand the organisational environment to proceed
to a resolution.
• Design Activity Stage: After problem identification,the organisation head starts to look for
various suitable courses or strategies or alternatives and identifies the merits and demerits of
each.
• Choice Activity Stage: Once alternatives have been developed, the administration begins the
choice activity stage. It critically evaluates the different consequences of all alternatives
available and a decision is taken after examining the abovementioned alternatives’ merits and
demerits and the most suitable course of action is selected. This stage requires skills such as
judgement,creativity,quantitative analysis and experience in the decision making process.
VALUES AND FACTS IN DECISION MAKING – SIMON:
• Simon opined that every decision comes with 2 components associated with it:
• Value component: Refers to such preferences which decision maker may be seen
pursuing as an ethical statement and which cant be evaluated as true or false.
• Fact component:Refers to such verifiable premises where propositions can be tested
to determine that whether they are true or false. Science as per Simon is concerned
with facts and not values.
• PROGRAMMED AND NON-PROGRAMMED DECISION MAKING:
 In regard to organisational decision making Simon identified two types of decision
making:
 Programmed decisions: Decisions having repetitive components and where pre

established examples are present.
 Non Programmed decisions: Non repetitive in nature and directed towards solving
problems in new environments and new variables.
 Simon advocated delegating to sub-units programmed decisions whereas non-
programmed decisions should be retained with the upper level strategic management.
RATIONAL DECISION MAKING – SIMON
Simon says that rationality in organisational decisions could be improved using the following
tools:
o Promoting high degree of specialisation.

o Applying Scientific tools in the process of Decision Making.
o Promoting operations on the basis of market mechanism.
o Promoting knowledge of political institutions.
o Creating a wider base of knowledge so that rationality could be improved in problem solving.
Retrospective decision model (implicit favourite model):
• This decision-making model focuses on how decision-makers attempt to rationalise

their choices after they have been made and try to justify their decisions. This model
has been developed by Per Soelberg. He made an observation regarding the job
choice processes of graduating business students and noted that, in many cases, the
students identified implicit favorites (i.e. the alternative they wanted) very early in
the recruiting and choice process. However, students continued their search for
additional alternatives and quickly selected the best alternative.
Errors in Decision Making
Some of the errors are:

a. Indecisiveness
b. Postponing the decision until the last moment
c. A failure to isolate the root cause of the problem
d. A failure to assess the reliability of informational sources
e. The method for analysing the information may not be the sound one
f. Do implement the decision and follow through

Models of Decision Making

Uploaded by

Copyright:

Available Formats

Models of Decision Making

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Read this document in other languages

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Models of Decision Making

Uploaded by

Copyright:

Available Formats

Models of Decision

• A classical decision model is a prescriptive approach that guides management on how it

• Decision-making involve the achievement of a goal. Rationality demands that the

 Programmed decisions: Decisions having repetitive components and where pre

o Promoting high degree of specialisation.

• This decision-making model focuses on how decision-makers attempt to rationalise

Some of the errors are:

You might also like

Models of Decision Making

Uploaded by

Copyright:

Available Formats

Models of Decision Making

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Read this document in other languages

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Models of Decision Making

Uploaded by

Copyright:

Available Formats

Models of Decision

• A classical decision model is a prescriptive approach that guides management on how it

• Decision-making involve the achievement of a goal. Rationality demands that the

 Programmed decisions: Decisions having repetitive components and where pre

o Promoting high degree of specialisation.

• This decision­-making model focuses on how decision-makers attempt to rationalise

Some of the errors are:

You might also like

• This decision-making model focuses on how decision-makers attempt to rationalise