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Taking a Decision

Preprint · March 2019

DOI: 10.13140/RG.2.2.20034.63684

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Artur Victoria
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Taking a Decision
Artur Victoria

Decisions are classified in: scheduled decisions and non-scheduled decisions. The
programmed decisions are characterized by being repetitive, routine and structured -
decisions automated by a sequence of procedures, not requiring the intervention of the
decision maker - besides being permanent, serving as a guide for the definition of
organizational goals, objectives, policies and procedures.

Non-programmed decisions are characterized by novelty, in addition to being unstructured -

non-automated decisions, which depend on the decision maker's solution. The
characteristic of novelty is presented because there are no previous references to solve the
problem or because of its complexity, or because, for its resolution, it is necessary to
implement specific measures.

These classifications highlight the characteristics of the decision-making process and allow
programming of what should be done during this process. In the decision-making process,
the quality of the decision is a fundamental factor because it affects the future of the
organization.

Manager rationality is necessary in decision making, but should be in line with the
information coming from the diagnosis of the problem, as well as the analysis and
evaluation of alternatives, in order to avoid problems higher than those that gave rise to the
decision-making process.

The decision’s maker capacity for understanding and choice are challenged at all times to
become objective, due to the need for rational decision-making in the context of
uncertainties in which the organizations are inserted.

The perception of the organizational reality is essential so that the administrator can make
the choice of one or more alternatives that best suit this reality and meet the organizational
objectives.

Therefore, a quality decision is based on the adequate use of information in the decision
process, in order to draw the alternatives and choose the option that leads to positive
results for the organization.

The right decision is, therefore, the most important factor in the decision-making process,
and should be based on the analysis and appropriate use of the information.

For Drucker (1998 apud DAVENPORT; PRUSAK, 1998, p.19), information is defined as "[...]
data endowed with relevance and purpose." In this way, information becomes relevant
when it becomes value-added. This added value is what gives information importance,
making it an essential subsidy for decision making. Thus, information becomes a qualified
product, when it receives treatment and interpretation, so that it can have an impact on the
people who use it.

Porter (1986) argues that, in the competitive environment, one of the factors determining
the differential of companies is the way information is used. In this way, the close tune
between the information and the choices of the administrators will favour the decision-
making process.

Elements of the Decision-Making Process

Elements that make up the decision-making process:

• The state of nature: conditions of uncertainty, risk, or certainty that exist in the decision-
making environment that the decision-maker must face;

• The decision maker: individual or group that chooses between the various alternatives;

• The objectives: purposes that the decision maker wants to achieve with their actions;

• Preferences: criteria that the decision maker uses to determine his or her choice;

• Situation: environmental aspects involving the decision maker, sometimes uncontrollable,

beyond the reach of their knowledge or understanding that influence their choice;

• Strategy: a course of action that the decision maker chooses in order to reach the
objectives in the best way, being this one dependent on the available resources;

• Result: consequence of a strategy.

Among the elements that make up the decision-making process, some directly influence
the choice of managers, and have direct consequences for the others. The state of nature,
the objectives and the situation will determine the possible alternatives for choosing the
strategy that will best define the decision making. And finally, the results will be
consequences of the established strategy to achieve them.

In the decision process, orientation is established in relation to the chosen alternative, thus
necessitating an objective rationality of managers. The decision-making process in phases,
namely:

• Identification of the problem: it consists of identifying the scenario in which the

organization is;

• Analysis of the problem based on the consolidation of the information about the problem,
and it should be treated as a system, considering the threats and opportunities;

• Establishment of solutions and alternatives for solving the problem;

• Analysis and comparison of alternative solutions through the assessment of the
advantages and disadvantages of each alternative;

• Selection of more adequate alternatives, according to pre-established criteria, by knowing

the advantages and disadvantages of these alternatives;

• Implementation of the selected alternative, including due training of the people involved;

• Evaluation of the selected alternative, through criteria accepted by the organization,

where such alternative should provide results to be evaluated

n this way, the importance of decision theory is highlighted, which defines the way in which
the decision-making process must be approached in the search for the appropriate decision
to solve the problem, as well as the definition of the future of the organization.

Decision-making Models

Decision-making models, at the outset, treated the decision-making process as a rational

issue, in which organizations should, based only on rationality, adapt to the scenarios in
which they were inserted. Subsequently, these models and their rationality began to be
questioned, being proposed more flexible models and adaptable to the organizational
reality, that allowed the decision makers to make the best choice in the limits of knowledge
of the problem to be solved in the decision process, such as lack of information.

Rational Model

The Rational model is based on neoclassical microeconomic theory, in which rationality is a

fundamental factor for decision making. Treats information objectively and demonstrates
the logic in the decision-making process, in which the decision-maker cannot allow himself
to be embroiled in optimism or pessimism.

Thus, it is observed that rational decision-making leads managers to see the organization in
a systemic way, to consider the setting of the organization, its culture, and a range of
possible alternatives, in order to consider the consequences that may occur before making
their decisions. Rational decision-making stems from the use of methods that lead the
administrator to choose the best solution to achieve the desired objectives, without
necessarily having to be free of errors.

The decision maker can make his choices based on beliefs that were previously conceived in
an irrational way. In this way, it is considered that the rationality of the decision-making
process is born according to the administrator's choice, based on viable alternatives. The
rational choice process, however, demonstrates the limitations of the human being that
leads the decision maker to no longer make choices that lead to rigorous results to
acceptable results within organizational goals.
Carnegie Model

The Carnegie Model or Model of Limited Rationality deals with the impossibility of the
decision maker to have access to all possibilities of action, in order to be able to evaluate all
alternatives, since it is impossible physically to have access and process all information
regarding the decision to be made.

In this perspective, the organization is seen as an alliance between the various interests
that involve it, in which the decision-making process comes from agreements between the
decision makers according to their preferences.

The information, as well as the alternatives, is available in a limited way, and the solutions
are chosen through the process of establishing rules, according to the interests and
objectives of those involved in this process. Thus, the decision is made based on the option
considered satisfactory for the organization.

In this way, we can see in this model that, despite the administrator's desire to act with
rationality in organizations, his actions are limited by the limited range of information
needed for the decision-making process. Nor does it have the processing capacity to
assimilate all the information in due time and it is also limited by the various interpositions
caused between the parties that will determine the choice.

Incremental Model

The Incremental Model of Lindblom and Quinn represent the impossibilities of rationalism
and the need to focus information. In this model, there is not only a correct decision, but a
series of attempts selected by analyzes and evaluations, in which actions are treated in a
flexible way, until reaching the desired degree. It is understood that in the decision-making
process, the actions differ from those previously used, in order to correct or avoid errors by
successive changes Incremental, leading the organization to a new course of action.

During the process, the course of action and the organizational objectives may change,
however, these changes will be effected in an amicable way, so that corrective action can be
taken, at the moment of perceiving the error. In this model, managers do not have
information or prediction, however, they choose alternative courses of action that differ
incrementally from those applied in the past.

This precaution is present in the sense of reducing the chances of possible errors. Thus,
decision makers are not limited to delimiting goals and evaluating the alternatives to reach
them, instead, they choose them after confronting them, in order to achieve the desired
results. In this way, the most appropriate decision is generated from a consensus and aims
at ensuring compliance between stakeholders.

Unstructured Model

The Unstructured Model was proposed by Mintzberg, who called the unscheduled decisions
of unstructured strategic decisions. According to this model, at the beginning of the
decision-making process, the administrator has little knowledge of the problem, alternatives
and possible solutions. In this model, the decision-making process is characterized as
dynamic and interfering.

This model applies when the level of uncertainty is high. In this model, the phases that make
up the decision making process are:

Identification, Development and Selection. In the Identification phase, the situation is

recognized and the diagnosis is made; in the Development phase, there are routines and
research of alternative solutions and design or solution design; and the selection phase can
be divided into three stages: pre-selection; evaluation / choice; authorization.

At the end of the three phases of decision making, the routines of support to the decision-
making process arise: routine control, which leads the process; communication routine,
which provides information and reports; and policy routine, which allows the decision
maker to seek a solution of his own in an environment full of influences. In this model, when
faced with obstacles, managers re-evaluate the alternatives and go back, if necessary,
starting the process again.

There are several steps in a non-linear process, in which decision-makers use their intuition
to reach the best decision, which requires a good period of time.

Garbage Can Model

The Garbage Can Model or decision by omission, by Cohen, March and Olsen, takes into
account the decision taken without proper consistency. The manager does not seek to
identify and analyze the problem in order to delineate the possible solution alternatives this
model deals with the decision-making process in highly ambiguous environments, called
"organized anarchies".

This ambiguity appears in three ways:

• Problem preferences: Decision makers sometimes have inconsistent and ill-defined

preferences, being susceptible to discovering their goals and understanding their priorities
through action;
• people have only a slight understanding of ends and means. The participants of the
organization gain knowledge by trial and error, but without a clear understanding of
underlying causes;

• Organized anarchies (the organizations) have the characteristic of slight participation.

Decision makers come and go through the process.

It is understood that the decision is made by choices, looking for problems; problems,
looking for choices; solutions, looking for problems to respond; and decision-makers,
looking for something to decide. In this sense, solutions are prior to problems.

In the garbage can are the problems available and individuals go to the garbage can to look
for problems to be solved. In this model, we can see a fragmentation of the company's
global vision and strategy in a series of partial choices, separated in the temporal plane, with
subsystems obeying different schedules.

Given the above, it is understood that, although decision-making models are different from
each other, they all converge to the steps that must be followed in solving each
organizational problem.

They have, however, their own characteristics in relation to the decision-making process,
since each one decides its own order in the process stages.

Management Information Systems in Decision Making

It is observed that the decision-making process is based on management information

systems, since such systems, within a structured and disciplined decision-making process
and with the appropriate managerial information, lead to the security that the administrator
needs to choose the best decision for the organization.

Information allows decision makers to make a decision, they present a variety of what they
call "technical attributes" that are defined by their importance: the cost of their opportunity
versus the benefit it provides ; opportunity; correction; relevance or meaning; comparison
and trend.

• cost of your opportunity versus the benefit it provides: the organization has a certain cost
for the information to reach the decision maker. In this case, if the benefit obtained with the
decision resulting from this information is equal to or less than its cost, it is verified that this
is not necessary for the organization;

• opportunity: the decision will have a maximum value if taken within a certain time; it will
preserve some value for some time, and finally, it will have no value but only cost;
• Correction: management information does not need to be accurate, because for this to
occur, it takes a certain amount of time to generate; just be right and available at the right
time, to reflect reality;

• Relevance or meaning: information has degrees of importance for decision making. The
administrator uses the most appropriate information, admitting a risk margin in the decision
process;

• Comparison and trend: comparing the actual performance, the budget and its variation,
and if possible indicate the tendency of the event, so that the origin of the deviation can be
found and corrected.

The importance of decision maker’s use of management information systems, which allow
the correct command, control and coordination of the management cycle.

It is observed that the decision-making process is in itself a process that involves not only
objective factors, but also subjective factors that, to a certain extent, are within the
objective factors.

This process encompasses different variables that will influence the choice of the best
decision or the most appropriate decision, from the analyzes and weights necessary for this
process.

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