Steps in rational decision making

Effective decision-making process requires a rational choice of a course of action. There is a need to define the term rational here. Rationality is the ability to follow systematically, logical, thorough approach in decision making. Thus, if a decision is taken after thorough analysis and reasoning and weighing the consequences of various alternatives, such a decision will be called an objective or rational decision. Therefore rationality is the ability to follow a systematic, logical and thorough approach in decision-making process. Gross suggested three dimensions to determine rationality: (i) the extent to which a given action satisfies human interests; (ii) feasibility of means to the given end; (iii) consistency. Steps of decision-making process are given below:

  1. Diagnosing and defining the problem: the first step in decision-making is to find out the correct problem. It is not easy to define the problem. It should be seen what is causing the trouble and what will be its possible solutions. Before defining a problem, a manager has to identify critical or strategic factor of the problem. Once the problem is properly defined then it will be easily solved. So, the first important factor is the determination of the problem.
  2. Analysis of problem: after defining a problem, a manager should analyse it. He should collect all possible information about the problem and then decide whether it will be sufficient to take decision or not. Sometimes it may be costly to get additional information or further information may not be possible whatever information is available should be used to analyse the problem. Analyzing the problem involves classifying the problem and gathering information. Classification is necessary in order to know who should take the decision and who should be consulted in taking it. Without proper classification, the effectiveness of the decision may be jeopardized. The problem should be classified keeping in view the following factors: (i) the nature of the decision, i.e., whether it is strategic or it is routine. (ii) the impact of the decision on other functions, (iii) the futurity of the decision, (iv) the periodicity of the decision and (v) the limiting or strategic factor relevant to the decision.
  3. Collection of data: in order to classify any problem, we require lot of information. So long as the required information is not available, any classification would be misleading. This will also have an adverse impact on the quality of the decision. Trying to analyse without facts is like guessing directions at a crossing without reading the highway signboards. Thus, collection of right type of information is very important in decision-making. It would not be an exaggeration to say that a decision is as good as the information on which it is based. Collection of facts and figures also requires certain decisions on the part of the manager. He must decide what type of information he requires and how he can obtain this. It is also important to note that when one gathers the facts to analyse a problem, he wants facts that relate to alternative courses of action. So one must know what the several alternatives are and then should collect information that will help in comparing the alternatives. Needless to say, collection of information is not sufficient; the manager must also know how to use it. It is not always possible to get all the information that is needed for defining and classifying the problem. In such circumstances, a manager has to judge how much risk the decision involves as well as the degree of precision and rigidity that the proposed course of action can afford. It should also be noted that fact finding for the purpose of decision-making should be solution-oriented. The manager must lay down the various alternatives first and then proceed to collect fact, which will help in comparing alternatives.
  4. Developing alternatives: after defining and analyzing the problem, the next step in the decision making process is the development of alternative courses of action. Without resorting to the process of developing alternatives, a manager is likely to be guided by his limited imagination. It is rare for alternatives to be lacking for any course of action. But sometimes, a manager assumes that there is only one way of doing a thing. In such a case, what the manager has probably not done is to force himself decision, which is the best possible. From this can be derived a key planning principle which may be termed as the principle of alternatives. Alternatives exist for every decision problem. Effective planning involves a search for the alternatives towards the desired goal. Once the manager starts developing alternatives, various assumptions come to his mind, which he can bring to the conscious level. Nevertheless, development of alternatives cannot provide a person with the imagination, which he lacks. But most of us have definitely more imagination than we generally use. It should also be noted that development of alternatives is no guarantee of finding the best possible decision, but it certainly helps in weighing one alternative against others and, thus, minimizing uncertainties.
  5. Review of key factors: while developing alternatives, the principle of limiting factor has to be taken care of. A limiting factor is onw which stands in the way of accomplishing the desired goal. It is a key factor in decision-making. It such factors are properly identified, manager can confine his search for alternative to those, which will overcome the limiting factors. In choosing from among alternatives, the more an individual can recognize those factors which are limiting or critical to the attainment of the desired goal, the more clearly and accurately he or she can select the most favourable alternatives. It is not always necessary that the alternatives solutions should lead to taking some action. To decide to take no action is also a decision as much as to take a specific action. It is imperative in all organisational problems that the alternative of taking no action is being considered. For instance, if there is an unnecessary post in the department, the alternative not to fill it will be the best one. The ability to develop alternatives is often as important as making a right decision among the alternatives. The development of alternatives, if thorough, will often unearth so many choices that the manager cannot possibly consider them all. He will have to take the help of certain mathematical techniques and electronic computers to make a choice among the alternatives.
  6. Selecting the best alternative: in order to make the final choice of the best alternative, one will have to evaluate all the possible alternatives. There are various ways to evaluate alternatives. The most common method is through intuition, i.e., choosing a solution that seems to be good at that time. There is an inherent danger in this process because a manager’s intuition may be wrong on several occasions. The second way to choose the best alternative is to weigh the consequences of one against those of the others. Peter Drucker has laid down four criteria in order to weigh the consequences of various alternatives. They are: (i) Risk: a manager should weigh the risks of each course of action against the expected gains. As a matter of fact, risks are involved in all the solution. What matters is the intensity of different types of risks in various solutions. (ii) Economy of effort: the best manager is one who can mobilize the resources for the achievement of results with the minimum of efforts. The decision to be chosen should ensure the maximum possible economy of efforts, money and time. (iii) Situation or timing: the choice of a course of a action will depend upon the situation prevailing at a particular point of time. If the situation has great urgency, the preferable course of action is one that alarms the organisation that something important is happening. If a long and consistent effort is needed, a ‘slow start gathers momentum’ approach may be preferable. (iv) Limitation of resources: in choosing among the alternatives, primary attention must be given to those factors that are limiting or strategic to the decision involved. The search for limiting factors in decision-making should be a never-ending process. Discovery of the limiting factor lies at the basis of selection from the alternatives and these are experience, experimentation and research and analysis which are discussed as: (a) Experience: in making a choice, a manager is influenced to a great extent by his past experience. Sometimes, he may give undue importance to past experience. He should compare both the situations. However, he can give more reliance to past experience in case of routine on his past experience to reach at a rational decision. (b) Experimentation: under this approach, the manager tests the solution under actual or simulated conditions. This approach has proved to be of considerable help in many cases in test marketing of a new product. But it is not always possible to put this technique into practice, because it is very expensive. It is utilized as the last resort after all other techniques of decision making have been tried. It can be utilized on a small scale to test the effectiveness of the decision. For instance, a company may test a new product in a certain territory before expanding its scale nationwide. (c) Research and analysis: it is considered to be the most effective technique of selecting among alternatives, where a major decision is involved. It involves a search for relationships among the more critical variables, constraints and premises that bear upon the goal sought. In a real sense, it is the pencil and paper approach to decision making. It weighs various alternatives by making models. It takes the help of computers and certain mathematical techniques. This makes the choice of the alternative more rational and objective.
  7. Putting the decision into practice: the choice of an alternative will not serve any purpose if it not put into practice. The manager is not only concerned with taking a decision, but also with its implementation. He should try to ensure that systematic steps are taken to implement the decision. The main problem whi8ch the manager may face at the implementation stage is the resistance by the subordinates who are affected by the decision. If the manager is unable to overcome this resistance, the energy and efforts consumed in decision-making will go waste. In order to make the decision acceptable. It is necessary for the manager to make the people understand what the decision involves, what is expected of them and what they should expect from the management. The principle of slow and steady progress should be followed to bring a change in the behaviour of the subordinates. In order to make the subordinates committed to the decision, it is essential that they should be allowed to participate in the decision making process. The managers, who discuss problems with their subordinates and give them opportunities to ask questions and make suggestions, find more support for their decisions than the managers who don’t let the subordinates participate. Now the question arises at what level of the decision making process the subordinates should participate. The subordinates should not participate at the stage of defining the problem because the manager himself is not certain as to whom the decision will affect. The area where the subordinates should participate is the development of alternatives. They should be encouraged to suggest alternatives. This may bring to surface certain alternatives, which may not be thought of by the manager. Moreover, they will feel attached to the decision. At the same time, there is also a danger that a group decision may be poorer than the one-man decision. Group participation does not necessarily improve the quality of the decision, but sometimes impairs it. Someone has described group decision like a train in which every passenger has a brake. It has also been pointed out that all employees are unable to participate in decision-making. Nevertheless, it is desirable if a manager consults his subordinates while making decision. Participative management is more successful than the other styles of management. It will help in the effective implementation of the decision.
  8. Follow up: it is better to check the results after putting the decision into practice. The reasons for the following up of decision are as follows: (i) if the decision is good one, one will know what to do, if faced with the similar problem again. (ii) If the decision is bad one, one will know what not to do, the next time. (iii) If the decision is bad and one follows up soon enough, corrective action may still be possible. In order to achieve proper follow up, the management should devise an efficient system of feedback information. This information will be very useful in taking the corrective measures and in taking right decisions in the future.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]
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