4 Types of Approach to

Decision-making within an
Organisational Setting
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Information on the different approaches to decision-making are given below:

There are several approaches to decision-making which offer insight into the process by
which managers arrive at their decisions. Rational approach is appealing as it is logical
and economical.

The other approach is the behavioural approach which attempts to account for the limits
on rationality in decision-making.

The third approach, namely, the practical approach combines features of the rational
and behavioural approaches.

Finally, the personal approach focuses on decision-making processes individuals use in

difficult situations.

A. The Rational Approach:

Rational decision-making approach is a systematic, step-by-step process for making
decisions. It assumes that the organization is economically based and managed by
decision-makers who are absolutely objective and have complete information.

(1) State the Situational Goal:

At the outset, a goal for a particular situation is stated. Some decision-models do not
begin with a goal. However, it is advisable because it can be used as a standard in
determining whether there is a decision to be made later on.
(2) Identify the Problem:
In this phase, the problem requiring decision is recognized and diagnosed. It involves
understanding the nature, magnitude and causes of the problem. The purpose of
problem identification is to collect information that has a bearing on the goal.

If there is a .discrepancy between the actual situation and the goal, action may be
required. Reliable information is an absolute necessity here. Inaccurate information can
lead to wrong decisions. At this stage, the constraints within which the problem must be
solved are also defined.

(3) Determining Decision Type:

Now decision- makers must determine if the problem requires a programmed or a non-
programmed decision. If a programmed decision is required, an appropriate decision
rule 0s invoked and a choice is made from the available alternatives.

(4) Generate Alternatives:
The next step in making a non-programmed decision is to generate alternatives. Here,
decision-makers generate alternatives on the basis of their education-academic as well
as professional, experience and knowledge about the situation.

In addition, information may be sought from colleagues, subordinates, experts and

superiors. Decision-makers may analyze the symptoms of the problems for clues or rely
on their own intuition or judgement to generate alternative solutions.

(5) Evaluate Alternatives:
Each alternative is assessed in terms of its Strengths and weaknesses, costs and
benefits as well as possible negative consequences keeping in mind predetermined
decision criteria. The positive consequences must be weighed against negative
consequences.

The ultimate decision criterion here is whether a particular decision will bring us nearer
the goal. According to Zeleny (1976), the evaluation process usually includes: (a)
describing the anticipated outcomes of each alternative, (b) evaluating the anticipated
costs of each alternative, and (c) estimating the uncertainties and risks associated with
each alternative.
In most situations, the decision-makers do not have perfect information regarding the
outcomes of all alternatives at their disposal.

(6) Choose an Alternative:
This is the most crucial step in the decision-making process. It involves selecting the
best alternative with maximum positive consequences, least or no negative outcomes,
less risks and minimum costs.

In other words, the expected value of each alternative is determined and the alternative
with the largest expected values is selected. Again, the choice of alternative depends on
decision-makers’ education, judgement, experiences, logical analysis etc.

At this stage, it is important to consider contingency plans. Contingency plans are

alternative actions to take if the primary course of action is unexpectedly disrupted or
rendered inappropriate. Planning for contingencies is part of the transition between
choosing the preferred alternative and implementing it.

(7) Implementing the Plan:

Once a decision is formally accepted, an authorisation is made for its implementation.
Implementation puts the decision into action and involves communicating the decision,
gathering support for and acquiring and assigning resources to ensure that it is carried
out.

It builds on the commitment and motivation of those involved in the decision-making

process. Successful implementation requires appropriate use of resources and good
management skills, leadership character sties, reward structure and knowledge and
application of group dynamics. Sometimes the decision-maker begins to doubt a choice
already made. This is known as cognitive dissonance.

Cognitive dissonance is the anxiety a person experiences when two sets of knowledge
or perceptions are incongruent or contradictory. In order to reduce cognitive
dissonance, the decision maker may seek o rationalize the decision further with new
information.

(8) Control:
This is the final stage of rational decision-making process, wherein, the outcomes of the
decision are measured a id compared with the predetermined, desired goals. If there is
a discrepancy between the two, the decision-maker may restart the process of decision-
making by revising/modifying/setting new goals.

Strengths and Weaknesses of the Rational Approach

This approach has several strengths. It forces the decision-maker to consider a decision
in a logical, sequential manner and an in-depth analysis of alternatives helps him to
choose on the basis of information rather than personal prejudices, emotions or social
pressure.

However, its weaknesses are that the manager does not always have perfect
information faces time and financial constraints, may have limited ability to process
information and may not be able to predict future accurately. Also, all the alternatives
cannot be quantified making comparisons difficult.

The following figure shows the rational decision-making process diagrammatically

(Moorhead and Griffin, 1999).

B. The Behavioural Approach:

This approach assumes that decision-makers operate with bounded rationality rather
than with the perfect rationality assumed by the rational approach. Bounded rationality
is the idea that decision makers cannot deal with information about all the aspects and
alternatives pertaining to a problem and therefore choose to tackle some meaningful
subset of it.

Thus, this process is neither exhaustive nor completely rational and therefore, solutions
arrived at are not entirely ideal. Decision-makers operating with bounded rationality limit
the inputs to the decision-making process, focus their attention on two or three most
favourable alternatives (especially if there is a time constraint), process these in great
detail and base their decisions on judgement and personal biases as well as logic.

This approach possesses the following features:

(i) Use of procedures and rules of thumb which reduce uncertainty in decision-making
initially. For example, uses of models of teaching have been found to enhance student
performance in the past. Hence teachers, knowing the linkages between the two decide
to use models of teaching in classrooms.
(ii) Sub optimizing which refers to knowingly accepting less than the best possible
outcome to avoid unintended negative effects on other aspects of the organization.

(iii) “Satisfying refers to examining alternatives only until a solution that meets minimal
requirements is found and then making no further efforts to look for a better one. The
search for alternatives is generally a sequential process based on procedures and rules
of thumb guided by previous experiences with similar problems.

Such a solution may not always be the optimal solution since the search often ends
when the first minimally acceptable alternative is identified.

This model by Herbert Simon is also known as Administrative Man Model.’

C. The Practical Approach:

This approach combines the steps of the rational approach with the worthwhile features
and conditions in the behavioural approach to create a more realistic process for
making decisions in institutions.

According to this approach, rather than generating all alternatives, the decision-maker
should try to go beyond rules of thumb and satisfying limitations and generate as many
alternatives as possible within the given time, money and other Practicalities of the
situation.

Here, the rational approach provides an analytical framework for making decisions while
the behavioural approach provides a moderating influence.

Those managers who have a tendency of jumping from one decision to another, making
decisions hastily and impulsively and barking out orders to subordinates usually do not
use much information or a rational approach to decision-making.

D. The Personal Approach:

The preceding three approaches explicitly explain the processes involved into decision-
making. However, they do not throw light on how people take decisions when they are
nervous, anxious, worried or agitated-whether in organizations or in personal matters.

Janis and Mann (1977) have provided a more realistic view of individual decision-
making in their ‘Conflict Model’. This model is based on research in social psychology
and individual decision processes. It is a personal approach to decision-making
because it deals with the personal conflicts that people experience in particularly difficult
decision situations.

The model has five basic characteristics:

(a) It deals only with important life decisions such as choosing the nature and type of
education and institution, career, marriage, major organizational decisions etc. that
commit an individual or institution to a certain course of action.

(b) It recognizes that procrastination and rationalization are mechanisms by which

people avoid taking difficult decisions and coping with the accompanying stress.

(c) It explicitly acknowledges that some decisions could possibly go wrong.

(d) It provides for self-reactions in terms of comparisons of alternatives with internalized

moral standards. If a particular course of action violates the decision-makers moral
convictions, it is unlikely to be selected even if it is economically and socially beneficial.

(e) It recognizes that at times the decision-maker is ambivalent about alternative

courses of action. This kind of situation makes it difficult for him to give a whole-hearted
commitment to one single decision. However, major decisions concerning one’s life are
either-or decisions that require commitment to one specific alternative without allowing
much compromise.

According to Janis-Mann conflict model of decision-making, a person, when faced with

a problem, analyzes the situation by seeking feedback (often negative) and asks
himself/herself whether the risks involved are serious if he or she does not make a
change.

If the answer is no, the person will continue his/her present activities. This situation as
known as uncomplicated adherence which entails continuing with current activities if
doing so does not entail serious risks.

On the other hand, if the risks involved are serious, if the person does not make a
change, the person will take necessary action to bring about a desirable change. This
situation is known as uncomplicated change which involves making changes in present
activities if doing so presents no serious risks.

Besides, the model also explains the concept of defensive avoidance which entails
making no changes in present activities and avoiding any further contact with
associated issues because there appears to be no hope of finding a better solution.

If a person has little time to deliberate on whether he needs to make a change perhaps
due to his advancing age he will experience hyper vigilance wherein he may suffer
severe psychological stress and engage in frantic, superficial pursuit of some satisfying
strategy.

On the other hand, if a person has two or three yea s to consider different alternatives,
he will undertake vigilant information processing which implies that he will thoroughly
investigate all possible alternatives, weigh their costs and benefits before making a
decision and develop contingency plans.

A. Closed decision making system:

If the manager operates in a known environment then it is a closed decision making
system. The conditions of the closed decision making system are:
(a) The manager has a known set of decision alternatives and knows their outcomes
fully in terms of value, if implemented.
(b) The manager has a model, a method or a rule whereby the decision alternatives can
be generated, tested, and ranked.
(c) The manager can choose one of them, based on some goal or objective.
A few examples are:
1. a product mix problem,
2. an examination system to declare pass or fail, or
3. an acceptance of the fixed deposits.
B. Open decision making system:
If the manager operates in an environment not known to him, then the decision making
system is termed as an open decision making system. The conditions of this system
are:
(a) The manager does not know all the decision alternatives.
(b) The outcome of the decision is also not known fully. The knowledge of the outcome
may be a probabilistic one.
(c) No method, rule or model is available to study and finalize one decision among the
set of decision alternatives.
(d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to
that decision, where his aspirations or desires are met best.
Deciding on the possible product diversification lines, the pricing of a new product, and
the plant location, are some decision making situations which fall in the category of the
open decision making systems. by prerna
Q4 : Distinguish between closed decision making system & open decision making system? What
is ‘What – if‘ analysis? Why is more time spend in problem analysis & problem definition as
compared to the time spends on decision analysis? Ans:Closed decision making is the term
used when the person who is in charge of the decision operates in a group known to him and
Open decision making system is When a manager operates in an environment not known to
him,. Open Decison making System All the decision alternatives are known by the
manager.Outcome can be on real data basis . Brainstorming will be done based on
rules,prototypes and models Closed Decision making System The manager does not know all
the decision alternatives.The outcome of the decision is also not known fully. The knowledge of
the outcome may be a probabilistic one. No method, rule or model is available to study and
finalise one decision among the set of decision alternatives. What if analysis Decisions are
made using a model of the problem for developing various solution alternatives and testing
them for best choice. The model is built with some variables and relationship between variables
considered values of variables or relationship in the model may not hold good and therefore
solution needs to be tested for an outcome, if the considered values of variables or relationship
change. This method of analysis is called ‘what if analysis.’ Q5 :How hardware & software
support in...

Business planning seems like it would be something that organizations do

well, given the near self-evident importance of the concept. Yet, that is not
necessarily the case. “In my experience leading dozens of business planning
workshops in countries all over the world, I’d say only about 10% to 15% of
teams I’ve encountered have an effective business planning process,”
according to author and business plan expert Tim Berry in Entrepreneur.

Organizations should develop a better understanding of how to approach

business planning. The following sections expand on the topic and the four
types of planning.
Why Plan?

“Planning is about managing resources and priorities in an organized way,”

Berry says. “Management is related to leadership, and it’s related to
productivity.”

If companies improve how they plan, managing and leadership will also
improve. The following steps can help businesses plan better.

 Devise a Plan: Write important details down and focus on strengths,

what matters, what people are most important to you and what you can
do for them. This will help you communicate your vision to your
employees.
 Define Success: How do you see your business in several years?
Define long-term goals and be specific. Establish milestones for certain
goals and who will achieve the goals. Look at what drives your
business; it may be presentations, conversions, page views or
something else. Then establish a review schedule and re-examine your
long-term goals as necessary.
 Put It in Motion: Track and analyze numbers to help you manage the
work behind the numbers. You’ll be better able to make changes — or
to develop new plans — that will help you manage better.

The 4 Types of Plans

Operational Planning

“Operational plans are about how things need to happen,” motivational

leadership speaker Mack Story said at LinkedIn. “Guidelines of how to
accomplish the mission are set.”

This type of planning typically describes the day-to-day running of the

company. Operational plans are often described as single use plans or
ongoing plans. Single use plans are created for events and activities with a
single occurrence (such as a single marketing campaign). Ongoing plans
include policies for approaching problems, rules for specific regulations and
procedures for a  step-by-step process for accomplishing particular objectives.

Strategic Planning

“Strategic plans are all about why things need to happen,” Story said. “It’s big
picture, long-term thinking. It starts at the highest level with defining a mission
and casting a vision.”
Strategic planning includes a high-level overview of the entire business. It’s
the foundational basis of the organization and will dictate long-term decisions.
The scope of strategic planning can be anywhere from the next two years to
the next 10 years. Important components of a strategic plan are vision,
mission and values.

Tactical Planning

“Tactical plans are about what is going to happen,” Story said. “Basically at
the tactical level, there are many focused, specific, and short-term plans,
where the actual work is being done, that support the high-level strategic
plans.”

Tactical planning supports strategic planning. It includes tactics that the

organization plans to use to achieve what’s outlined in the strategic plan.
Often, the scope is less than one year and breaks down the strategic plan into
actionable chunks. Tactical planning is different from operational planning in
that tactical plans ask specific questions about what needs to happen to
accomplish a strategic goal; operational plans ask how the organization will
generally do something to accomplish the company’s mission.

Contingency Planning

Contingency plans are made when something unexpected happens or when

something needs to be changed. Business experts sometimes refer to these
plans as a special type of planning.

Contingency planning can be helpful in circumstances that call for a change.

Although managers should anticipate changes when engaged in any of the
primary types of planning, contingency planning is essential in moments when
changes can’t be foreseen. As the business world becomes more
complicated, contingency planning becomes more important to engage in and
understand.

Becoming a Business Leader

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