Lecture - 8 4.3 Individual Models of Decision Making: The Rational Model

Lecture - 8 4.
3 Individual Models of Decision Making

No matter how much you know, you can't possibly know everything. No one can possibly know all the input to a decision, process all the possible outcomes, and know every output from the final decision. Neither can an Information System. However, it can gather more input, process it faster, and output more alternatives than a human can. What a machine can't do is make decisions in context. That could be a positive aspect or a drawback. Humans make decisions based on experience and in very distinct ways based on their frame of reference. For instance, some people won't buy a certain type of television because they haven't had "good luck" with that brand before. Based on their experience, they choose a different alternative than another person would. Some people will do careful, extensive research into all the possible models of televisions and make a decision based on that data. Some people will purchase the same brand as the one they already have. Others simply walk into the store and point to the model they want.
The Rational Model

The rational model of human behavior says that people will evaluate the situation and determine what they want the result to be. They will determine the alternative courses of action, know the consequences of each course, and then pick the course with the biggest payoff. If it were only that easy! Think about some of the decisions you've made recently. Did you have an absolutely clear understanding of the situation and know exactly what you wanted the end result to be? Probably not if you did not evaluate the decision closely and thoroughly. Did you examine every possible solution? Probably not. Did you fully comprehend the consequences of every possible solution? Not likely. Was there only one possible outcome to your decision or were there several?
Bounded Rationality and Satisfiying

Sometimes people will follow the rational model to a certain extent, with a lot of compromising throughout the decision-making process, by using bounded rationality. That is, they will look at several alternatives, briefly evaluate the consequences of the alternatives, and then pick the solution that will get them closest to where they want to be (satisficing). If they've experienced a similar situation, they'll probably go with the decision most like the previous decision.
Muddling Through
Compromise is a very common occurrence in decision-making. Your club needs to raise dues to pay for a new piece of equipment. Some of your members don't want to purchase the equipment and others want the best brand on the market. A spirited discussion takes place with each side presenting conflicting opinions. After a while, you agree to purchase
a used piece costing only half of the original price. You muddled through the decisionmaking process until everyone agreed on the solution. As it turns out, the decision was similar to one made several years before. By following the previous decision, your group practiced incremental decision making.
Psychological Types and Frames of Reference

The cognitive style theory supports the idea that people make decisions based on their experiences and values. Why are there so many different types and styles of automobiles and trucks? After all, isn't the basic idea of owning a vehicle simply a matter of how you get from one location to another? Why do you choose a red car over a blue car? Why do some people own a pickup truck in the heart of a major metropolitan area? Isn't the reason for owning a truck simply to haul things? Major studies have confirmed that people decide the color of their vehicles based on personality type. People choose the type of vehicle, car or truck or minivan, based on their experiences and psychological needs more than for the absolute need for a particular type of transportation. People are people. Sounds simplified and silly, but it's one of the best explanations for why people make decisions the way they do. Laudon and Laudon point out that some people use a systematic decision-making process, while others use an intuitive process. You could argue that one method is better than the other, but it's an argument you could carry on forever. Bottom Line: You should remember that every decision causes change and that people react to change in many different ways. Some people embrace change; others abhor it. But you can't make a decision without causing a change somewhere.
4.4 Organizational Models of Decision Making

If it's tough for an individual to make a decision, think how hard it is in an organization with many people all used to making decisions their way! The organizational decisionmaking process must take into account the various wants and needs of the people who make up that organization. Let's look at various models of organizational decisionmaking.
Bureaucratic Models
According to the bureaucratic model, the main goal of an organization is the preservation of the organization itself. Change is very slow and difficult because the
structure isn't designed for change. Change causes uncertainty, and this type of organization isn't strong on changing anything. Change is difficult in the bureaucratic organization because most use Standard Operating Procedures to determine how tasks will be accomplished. These SOPs have developed over a long period of time and are usually based on previous decisions and work habits. To some members of the bureaucratic organization, changing the SOPs is to say that the previous methods were inferior or wrong. That's not necessarily the case, since changing environments can bring the need for changing the organization. Nonetheless, changing the bureaucratic organization is a slow and sometimes painful process. A word of caution: Everyone automatically associates "bureaucratic" with government organizations. Private organizations can be just as interested in preserving their structure. Many private companies could use some drastic changes and improvements, but they don't make them because they are more interested in keeping the status quo.
Political Models of Organizational Choice

The decision-making process in the political model is based not necessarily on what's good for the organization, but on what's good for the players involved. Compromise is more the norm than clear-cut decisions. The goal of this type of organization is to blend the interests of the players into a decision that satisfies as many people or entities as possible.
"Garbage Can" Model

Garbage can model sounds like a funny label, but it's very apt. "Oops" is the operative word in this organization. Too often the people involved in this type of decision making process develop the wrong answer to the wrong question. Any success is purely accidental. Bottom Line: Understanding how an organization makes decisions can help increase the success of the decisions made.
4.5 How Information Technology Has Changed the Management Process

Times have changed and so have the methods by which managers make decisions. Information technology has helped speed the change in methods.
Traditional and Contemporary Management
Technology has enabled companies to flatten their hierarchies. The last few years has seen an exodus of middle managers. Companies simply didn't need the extra layers because of technological advances that allow lower levels of employees to communicate and collaborate easier and faster than ever before. Managers in these newly flattened organizations are now responsible for making sure employees know the environmental influences on the organization, know the goals of the organization, and adjust the organization to meet the new influences. Managers then free their employees to meet not only the organization's goals, but also their personal goals. Information systems can help managers and employees work more efficiently and effectively in this new environment by increasing the amount of information available to all employees. Communications are faster and more widespread with new technologies that enable employees and managers to collaborate more closely and work better in teams. New information systems also enable virtual organizations and geographically dispersed teams and groups to work together to meet personal and organizational goals.
Implications for System Design

The decision-making process is much different in today's organization than it was just a few years ago. The danger of building a system to accommodate today's process is that it will not take these changes into account. Understanding how people and organizations make decisions will help build a system that can accommodate the organization and the employees. Information systems should be created not only to help mangers and employees make decisions, but also help them better communicate between all levels and units of the organization. Remember, decisions are not made in isolation.. More important, decisions affect a wide range of people, and the system should accommodate this fact. The real danger in using information systems to help make decisions is that the decisionmaking process will be based on the wrong information. Because managers may assume that the situation is similar to one they experienced before, they may not be as careful as they would be if it were an entirely new situation. For instance, management may decide that the new packaging materials are as good as the old ones because they are the same color. Therefore managers won't be as careful in studying all the data, all the possible outcomes and the alternatives when making the decision to change suppliers. They make the decision based on the first available alternative that moves them toward their ultimate goal. They find out too late that the packaging materials are not as good as the old ones and they end up with more damaged goods and irate customers. Information systems should have these characteristics:
They are flexible and provide many options for handling data and evaluating information.
They are capable of supporting a variety of styles, skills, and knowledge. They are powerful in the sense of having multiple analytical and intuitive models for the evaluation of data and the ability to keep track of many alternatives and consequences. They reflect the bureaucratic and political requirements of systems. They reflect an appreciation of the limits of organizational change and an awareness of what information systems can and cannot do.
Bottom Line: Using information systems in the decision-making process should be a positive exercise. That is, the system should help managers at all levels make better decisions, more efficiently, to the benefit of a greater number of people, and to improve the organization.
Discussion Questions:
Click on the Discussion icon in the top toolbar to answer the following Discussion Questions.
1. Why does the technical-rational perspective seem outdated in many organizations? 2. How does the behavioral perspective correct the flaws in the technical-rational perspective? 3. Describe how your organization can or cannot use the knowledge-based view of management. 4. Following the stages of decision making as described in the text, make a decision. Write down each stage of the decision. 5. Analyze your organization according to the three models of organizational decision making. Which one comes closest to describing how your organization makes decisions?
The Internet: Electronic Commerce and Electronic Business 5.1 The Internet: Electronic Commerce and Electronic Business 5.2 The Internet and Electronic Commerce 5.3 Intranets and Electronic Business 5.4 Management Challenges and Opportunities Discussion Questions

Lecture - 8 4.3 Individual Models of Decision Making: The Rational Model

Uploaded by

Copyright:

Available Formats

Lecture - 8 4.3 Individual Models of Decision Making: The Rational Model

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lecture - 8 4.3 Individual Models of Decision Making: The Rational Model

Uploaded by

Copyright:

Available Formats

Lecture - 8 4.

3 Individual Models of Decision Making

The Rational Model

Bounded Rationality and Satisfiying

Psychological Types and Frames of Reference

4.4 Organizational Models of Decision Making

Political Models of Organizational Choice

"Garbage Can" Model

4.5 How Information Technology Has Changed the Management Process

Traditional and Contemporary Management

Implications for System Design

You might also like