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Methods of decision-making - Coggle Diagram
Methods of decision-making
RATIONALITY
fully objective and logical
carefully define a problem and would then have a clear and specific goal
using rationality would consistently lead to selecting the alternative that maximises the likelihood of achieving that goal
assumes that decisions are made in the best economic interests of the organisation
decision assumed to be maximising the organisations interests, not their own interests
Managerial decision making can follow rationality is the following conditions are met
manager is faced with a simple problem in which goals are clear and the alternatives limited
time pressures are minimal
cost of seeking out and evaluating the alternatives are low
the organisational culture supports innovation and risk taking
outcomes are relatively concrete and measurable
BOUNDED RATIONALITY
despite the perfect rationality, managers are expected to follow a rational process
make decisions rationally, but are limited (bounded) by their ability to process information
because they cannot possibly analyse all the information on all alternatives, managers sastisfice rather than maximise.
satisfice - acceptance of solutions that are 'good enough'
-> they are being rational within the limits (bound) if their ability to process information
most decisions that managers do not fit the assumptions of the perfect rationality, instead they must satisfice
decision making also may be strongly influenced by the organisation's culture, internal politics and power considerations and by escalation of commitment
escalation of commitment -is an increased commitment to a previous decision despite evidence that it may have been wrong
INTUITION
a subconscious process of making decisions on the basis of experience, feelings and accumulated judgement
managers regularly use their intition
making a decision on intuition or 'gut feeling' does not necessarily happen independently of rational analysis; rather the two compliment each other.
a manager who has had experience with a particular, or even similar, type of problem or situation often can act quickly with what appears to be limited information
does not rely on a systematic and thorough analysis of the problem or identification and evaluation of alternatives but instead uses experience and judgement to make a decision