Models of Decision Making

Models of Decision Making 

1. Rational Economic Model/Econologic Model

Decision maker as an economic being tries to select the best alternative for achieving the optimum solution to a problem.  Goals are clear all available choices are known to the decision maker and outcomes of all actions are also known to him.  He has complete knowledge and all the facts required to make a rational decision.  He can list down all the alternatives account to his preference and all the aviation date. The decision maker should select the alternative which would maximize his satisfaction. 

This model is a useful prescription about how decisions should be made. It doesn't portray how decisions are actually made. Rationality is an ideal that is rarely achieved in Organisation.

2. Administrative Model of Man or Behavioural Theory (Simon/Cyert/March)

Bounded Rationality /Descriptive Decision theory. It does not assume individual rationality in decision making process. People while they may seek the best solution usually settle for much less because the problems they confront demand greater information processing capabilities than they usually posses. Optimality is a utopian concept.  People have only a limited and simplified view of problems before them because they don't have full information;  don't posses knowledge and don't have the capabilities. Therefore instead of searching for and choosing the best alternative managers usually accept decisions that are usually good enough rather than ideal called satisficing. This model describes how decisions are actually made. It is a realistic model.

3. Lindblom's  Incremental Model

Charles E Lindblom -"Science of Mudding through ".

Actual decision making in administration is different from how it is generally described in theory. Decision makers always continue the existing progrom and policies with slight modifications.  Incrementalism is virtual continuation of the previous activities with few changes.

4. Etzioni's  Mixed Scanning Model

This approach is a blending of Rationalism and Incrementalism. 

In this model two approaches are used-

●a broad approach covering all areas and alternatives but not in Greater detail. 

●a detailed a approach that would focus on the selected alternatives in depth.

The idea is to employ two levels of scanning flexibly depending upon the problem. 

5. Garbage-Can Model

Decision makers function in organised anarchies characterized by problematic preference under technology and fluid participation. Boundaries of the organization are uncertain and changing.  Audiences and decision makers change capriciously.  This perspective examines how the various  unanticipated streams flowed together to produce what actually happened.

Techniques

1.Brain Storming -One of the oldest and best known techniques for encouraging creative thinking during planning and decision making . It encourages Sharing of ideas in a setting free of interruptions and risks of immediate evaluation and discussion.  Members are presented with a problem and are asked to develop as many solutions as possible.  Priciple of Deferred Judgment is used.

2. Synectics- It means joining together of different and apparently irrelevant elements. Group members are encouraged to generate ideas without any inhibition even relating to areas that are unrelated to the problem but eventually which might be linked with the problem at hand. It involves looking at familiar in unfamiliar manner and unfamiliar in familiar manner.

3. Nominal Grouping- It  is a highly structured approach and follows several stages. There are 7-10 participants with different backgrounds and training . They are in same physical location but do not directly interact while working together. 

Group- Problem outlined - List of ideas in writing -Members present their ideas -Open discussion - evaluation additions, modification - Voting in writing to different ideas - Secret ballot after discussion - Decision taken. 

4. Delphi Technique- It uses a group of knowledgeable people who work anonymously to solve problems presented to them. A panel of persons possessing knowledge is selected and asked to make suggestions anonymously.  Suggestions are pooled and a feedback report is prepared.  Again a second questionnaire is sent along with the feedback report . Person votes on ideas and generates new ideas. The whole process is anonymous and therefore gives more freedom to participants to express their ideas.

Bases for Decision Making 

1. Non-Quantitative Bases

These are highly personal-

1. Intuition 

2. Facts

3. Experience 

4. Logical Analysis 

2.Quantitative Bases

1. Operations Research - Bringing together of available data processing this data and from them resolving quantitative reports on merits and demerits of potential courses of action. Optimization Input-Output and Mathematical model is used.

2. Linear Programming - Helps to determine optimal combination of limited resources.  Problems which are suitable for linear programming are maximizing production minimizing distribution costs etc.

3. Simulation -Use of empirical models . It is basically a systematic trial and error approach to complex process. It Creates an abstraction of reality makes a dry run of the problem at hand to observe the effect of Variables on the finished results. Approach is to systematically duplicate what happens in reality.

4.Monte Carlo- Narrow form of simulation.  It also includes probability factors. Approach is predictive and tells us what will happen in actual events.

5.Queuing -Efforts to minimize losses due to lost time unused labour and excessive cost caused by waiting lines or queues.  Queuing is concerned with flow of machines,  human resources,  work process,  communication and materials. 

6.Gaming - Kind of simulation.  Helpful when the problem is concerned basically with the actions of competitors . Implies use of least regret.