MODELS OF RATIONALITY

Rational Decision Making

The rational decision making model assumes
decisions are based on an objective, orderly,
structured information gathering and analysis.
The model encourages the decision maker to
understand the situation, organize and interpret
the information, and then take action. There are
eight steps in the rational decision making
process
• Understand the issue. The issue is clear to you. Customers are rating
their experience at your property online, and they’re not happy. This
will surely damage your team’s efforts to generate new business. You
need to find a way to earn better customer ratings.
• Define the problem. You and your team sit down and read the last
twenty or thirty customer reviews on three different travel sites. It
turns out that customers’ unhappiness coincides with a recent increase
in rates. They no longer feel they’re getting good value for their money.
• Define the objectives. What criteria will your solution have to meet?
Clearly, you want to start getting better ratings from customers. You
don’t want to see customers complaining about anything online. Your
objective is 100% happiness, 100% five-star ratings.
• Diagnose the problem. This is the stage where you look to determine
and understand the root causes of your issue. Perhaps you decide that
all customer-facing staff report daily on quality issues. And maybe you
consult with operations on additional perks that can be incorporated
into the guest experience without giving away too much margin.
• Develop alternatives. You ultimately want to create a lengthy list of
alternatives and not decide on one too quickly. You look over your employees’
reports on quality. You wait on operations for recommendations on extra
perks. You collect all the data.
• Evaluate alternatives. Once you have all your alternatives on the table, you
can start to make a choice. Every employee suggestion, every operations
recommendation should be in front of you, and you consider each option
carefully.
• Select an alternative. One of your employees has suggested two additional
members for the housekeeping staff, as the current level of staff is having
difficulty keeping up with the increase precipitated by an office building
opening up down the street. A member of your operations team has suggested
providing a continental breakfast for business travelers in response to the
increase in that customer type. Both seem like good ideas. Which will provide
the bigger impact?
• Implement alternative. You decide to hire the two additional members for the
housekeeping staff, understanding that your customers view quality in clean
rooms and common spaces. You get the budget approved and post for those
two jobs. You make a plan to check in at the thirty day mark to see if
customers’ ratings have improved.
 Bounded Rationality Model
• The bounded rationality model assumes numerous organizational and individual
factors restrict rational decision making. This is the version of decision making that
occurs most often in organizations, because the assumptions of this model are much
closer to the truth:
• Early alternatives and solutions are quickly adopted because of perceptual limitations.
• Managers often don’t have access to all the information they need.
• Managers are not aware of all the alternatives and can’t predict the consequences of
each one.
• Organizational goals constrain decisions.
• Conflicting goals of multiple stakeholders can force a compromise of a decision.
• Because a human being is limited in the amount of information he or she can process,
when a complex decision needs to be made, he or she will reduce the problem to a
manageable size. By limiting the number of choices and the amount of necessary
information, the product is a decision that’s acceptable and satisfactory. This is
sometimes referred to as the Satisficing model.
 Linear Model of Decision Making
• Linear decision making involves listing positive and
negative factors of each decision alternative. If you’ve ever
made a list of pros and cons around a certain decision,
then you’ve embarked on linear decision making.
• In order for it truly to be linear decision making, the
decision maker must then assign a numerical “weight” to
each of his pros and cons, and arrive at a total score for
each side. For instance, let’s say you were trying to decide
if you should or should not hire a very experienced but
very expensive candidate for a position in your office. Your
linear decision making model might look like this:
Reasons to Hire Candidate Reasons to Not Hire Candidate

Very experienced in an area Another candidate might be

where it’s difficult to find 3 able to be hired cheaply and –2
experience trained

Would not lose as much Wouldn’t be promoting from

productivity because candidate 3 within but rather hiring from –3
has experience outside

Candidate would be a good fit Candidate has done some job

with the group culturally 1 –3
speaking hopping recently

Searching for another qualified Did not impress all the

candidate, even if he has to be 2 managers that interviewed him. –3
trained, may take a while.

Total 9 Total –11

 Intuitive Decision Making
• Intuitive decision making is a model that assumes
managers make decisions by relying on past experience
and their personal assessment of a situation. This model
of decision making is often used when there are high
levels of uncertainty or complexity around a particular
problem, or when the decision is novel and the managers
don’t have past experience with this kind of problem.
• If managers are faced with uncertain, complex situations
and they can’t get the right information to make a good
decision quickly, they are apt to rely on hunches and
intuition. Given the choice between this model and a
linear model (like the one discussed above), managers
should reach for the linear model.
Garbage Can Model
• The garbage can model is one where managers use
information about problems, participants, solutions
and opportunities haphazardly to generate ideas and
potential decisions. Unlike the other decision making
models we discussed, the garbage can model does
not always lead to satisfactory solutions, because the
problem does not always precede alternatives and
solutions.
• For instance, the corporate office of an organization
might have been recently informed of the benefits of
going to an “open environment” where people can
talk and collaborate freely. Senior management may
get behind this idea and start looking for ways to
knock down cube walls and make their environment
more collaborative before it’s even been determined
that their office has issues being collaborative.