Reference no: EM133268579

Decision-making includes a process of identifying issues and making choices between alternative courses of action. The rational decision-making process generally includes six steps:

defining the problem or opportunity,
identifying the goals and objectives,
weighting the objectives based on the level of importance of each,
outlining possible courses of action,
rating each alternative according to the objectives and goals, and
determining an optimal solution.
In reality, managers often do not have all the necessary information to make the best decisions. As a result, rationality is constrained. Managers generally need to make decisions based on incomplete or ambiguous information. In many cases, managers have to opt for a solution that is "good enough," called satisficing, because they do not have the time or resources to consider every possible option.

Managers use heuristics or rules of thumb to reduce the demands of information processing and investigation. Common heuristics include availability, representativeness, and adjustment. The availability heuristic contends that an individual makes a decision based on his or her recall of similar events or situations. The representativeness heuristic contends that an individual makes decisions based on previously formed stereotypes. The adjustment heuristic refers to decisions being based on a certain starting point. Sometimes individuals rely on their intuition to make a decision. While intuition can be helpful in making quick judgment calls, it can also be dangerous in complex situations, when relying on intuition may result in discounting new information or perspectives. Decisions can also be influenced by the way in which an argument or situation is framed.

Although individuals should strive to make rational decisions, emotion can be an integral part of the decision-making process. Once an individual becomes emotionally committed to a course of action, he or she can become blinded to new information or perspectives. Specific situations or contexts play a role in decision-making as they can provide cues to what is or is not socially appropriate. Individuals may choose to do what is socially expedient instead of exploring all alternatives.

Rational decision-making is especially challenging at the organizational level because many individuals can affect the decision-making process. To make effective decisions in the context of an organization, it is important to understand how decisions are made in these environments. Thus, four decision-making models are used to analyze how decisions are made in organizations: the classical (rational) model, the administrative model, the political model, and the garbage can model.

Because decision-making is subject to a number of influences that can enable it to depart from rationality, managers need to understand these influences. It is important to balance rational and intuitive decision-making processes to ensure that alternatives and choices are evaluated in an expedient, yet complete manner.

When making decisions that are constrained by time or information, what can managers do to ensure a better outcome? What are the potential dangers of satisficing?