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Sunday, May 15, 2011

Express various models of decision making process.

Express various models of decision making process. Describe a model which is most
suitable to your organization or any organization you are familiar with and why? Describe the organization you are referring to.

2 Answer. Decision making is the process of selection of a course of action from among alternatives. As a manager one would need to take decisions under different situations. The kind of decision used for routine and repetitive work and the other is new, unexpected and nonrepetitive one. The earlier one is termed as programmed decision and other nonprogrammed decision. Decisions are not always necessarily be either of the two, it can be a combination of both. Most of the strategic decisions however, are nonprogrammed decisions and involve a certain amount of risk.

Before a nonprogrammed decision is made the manager should calculate the amount of risk involved in the decision known as Risk Analysis, look at the major alternatives available-Decision Trees. The decision made by the manager would also be dependent on his attitude towards risk taking and this is called preference theory or utility theory.

1. The rational Model: According to the School of Information Sciences and Technology at Penn State University, the Rational Model of decision-making, “requires comprehensive problem definition, an exhaustive search for alternatives, and thorough data collection and analysis. According to this model, information exchange and communication are unbiased, and accurate decision alternatives are intentionally chosen to bring maximum benefits to the individual, organization or group. Essentially, the Rational Model requires people to have a clear understanding of the actual problem. Unless the issue is clearly established, the Rational Model can be ineffective. This model also incorporates extensive research, so that all options or alternatives can be brought before the decision-maker(s). The Rational Model is a step-by-step decision-making model. Basically, the Rational Model can be broken down into four basic steps, which can be further diluted to create the additional three to five steps.

2. The Carnegie Model: This model recognizes the effects of “satisficing”, bounded rationality, and organizational coalitions.
a) Satisficing: Instead of searching for all possible solutions to a problem, managers resort to satisficing – that is they decide on certain criteria that they will use to evaluate possible acceptable solutions. The criteria automatically limit the set of possible alternatives. The managers then select one alternative from the range of alternatives they have generated. Thus satisficing involves a much less costly information search and puts far less burden on managers than does the rational model.
b) Bounded rationality: The carnegie model assumes that managers are limited by bounded rationality – a limited capacity to process information. The fact that they have limited information processing capacity does not mean that will take the first acceptable solution they are offered. Managers can improve their decision making by sharpening their analytical skills. Managers can use technology like computers to improve their decisions making skills.
c) Organizational Coalitions: The carnegie model views an organization as a coalition of different interests, in which decision making takes place by compromise, bargaining, and negotiation between managers from different functions and areas of the organization. Any solution chosen meets approval of the dominant coalition, the collection of managers or stakeholders who have the power to select a solution and commit resources to implement it. Over time, as interests change, the makeup of the dominant coalition changes and so does decision making. This carnegie model recognizes that decision making is not a neutral process with objective decision rules as they pursue their goals and interests.

To sum up the carnegie model recognizes that decision making takes place in an uncertain environment where information is often incomplete and ambiguous. It also recognizes that decisions are made by people who are limited by bounded rationality, who satisfice, and who form coalitions to pursue their own interests.

3. The Incrementalist Model: According to this model, managers select alternative courses of action that are only slightly, or incrementally, different from those used in the past, thus lessening their chances of making a mistake. The incrementalist model implies that managers rarely make major decisions that are radically different from decisions they have made before. Instead they avoid or correct mistakes through a succession of incremental changes, which eventually may lead to a completely new course of action. According to the incrementalist model, managers, limited by lack of information and lack of foresight, move cautiously one step at a time to limit their chances of being wrong.

INCREMENTALISM - the Example of British Government
Lindblom & others looked at US system of Government- but much work on Britain.
i. The fragmented British political structure. There is no formal concentration of power i.e. we do not have a President. Departmental pluralism- -Public Spending policy is incremental
ii. Lack of radical agenda leads to incrementalism.
iii. The growth in power & influence of pressure groups- trade unions in post war Britain, single issue groups such as Greenpeace/ Friends of the Earth, Anti War Campaigns etc.
Jordan & Richardson- Groups mediate radical or rationally planned decisions. E.g. Health, education, agriculture, urban renewal, sport.
iv. Policy Communities and networks- every sector of decision making features a range of actors, e.g., Urban renewal in East Manchester.

According to me the best decision making models are the Unstructured and the Garbage Can Model. Both these models are described below.

4. The Unstructured Model: This model describes how decision making takes place in environments of high uncertainty. This model recognizes the incremental nature of decision making and how decision making takes place in a series of small steps that collectively add up to a major decision over time. Incremental decisions are made within an overall decision-framework consisting of three stages- identification, development, and selection. In the identification stage, managers develop routines to recognize problems and to understand what is happening to the organization. In the development stage, they search for and design alternatives to solve the problems they have defined. Solutions may be new plans or modifications of old plans as in the muddling-through approach. Finally in the selection stage, managers use an incremental selection process- judgement and intuition, bargaining, and to a lesser extent formal analysis (typical of the rational model) to reach the final decision.

In the unstructured model, whenever organizations encounter roadblocks, they rethink their alternatives and go back to the drawing board. Thus decision making is not a linear, sequential process but a process that may evolve unpredictably in an unstructured way. For example, decision making may be constantly interrupted because uncertainty in the environment alters managers’ interpretations of a problem and thus casts doubt on the alternatives they have generated or the solutions they have chosen. The managers must then generate new solutions and find new strategies that help the organization adapt to and modify its environment. The organization tries to make the best decisions it can, but uncertainty forces it to adopt an unstructured way of making decisions. Thus the unstructured model tries to explain how organizations make non-programmed decisions, and the incrementalist model tries to explain how organizations improve their programmed decisions over time.

5. The Garbage Can Model: The view of decision making as an unstructured process is taken to its extreme in the garbage can model. This model turns the decision making process around and argues that organizations are as likely to start making decisions from the solutions side as from the problem side. In others words, decision makers may propose solutions to problems that do not exist; they create a problem that they can solve with solutions that are already available.

Garbage can decisions making arises in the following way: An organization has a set of solutions, or skills, with which it can solve certain problems- for example, how to generate new customers, how to lower production costs, or how to innovate products. Possessing these skills in making custom-designed furniture. The head of the marketing department persuades the company president that the organization should exploit these skills by expanding internationally. Thus a new problem- how to manage how to manage international expansion- is created because of the existence of a solution- the ability to make superior custom-designed furniture.

While an organization is encountering new problems of its own making, it is also trying to find solutions to problems it has identified in its environment or in its internal operations. To further complicate the decision making process, different coalitions of managers may champion different alternatives and compete for resources to implement their own chosen solutions, and the preferences of different individuals and coalitions all mix together and contend with one another for organizational attention and action. In this situation, an organizational becomes an organized anarchy in which the selection of alternatives depends on which coalition’s or manager’s definition of the situation holds sway at the moment. Chance , luck, and timing are important determinants of what the organization decides to do, because the problem that is currently the major source of uncertainty facing the organization has the best chance of being dealt with. Outcomes for the organization become more uncertain than usual, and decision making becomes fluid, unpredictable, and even contradictory.

The following diagram shows the garbage can model.

The reality of decision making in organizations is clearly a far cry from the process described by the rational model. Instead of benefiting from the wisdom of all knowing managers generating all possible solutions and agreeing on the best one so that decisions can be programmed over time, real organizations are forced to make unprogrammed decisions in an unstructured, garbage-can-like way in order to deal with the uncertainity of the environment that suurounds them.

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