Making Organizational Decisions - Model-Based Approach

Darryl Bachmeier
Aug 24, 2019
Strategy


For any person, decision making is one of the inseparable aspects of life. From waking up in the morning to going back to bed at night, almost every minute, we’re having to make decisions either consciously or subconsciously. One estimate shows we make 35,000 rational decisions in a single day on average. So needless to say decision-making encompasses a large part of our life.

But all decisions are not the same. Something as simple as choosing breakfast has very little consequence compared to say making organizational decisions. Whatever you may have for breakfast, whatever the decision or choice might be, the stake is very low. But when you’re making an organizational decision, the company’s prospects, growth, profit, and any other major aspect may be in line, which makes the stakes of that decision significantly higher. And with higher stakes comes the higher dilemma of decision making. So how do you make a decision in a high profile, high stakes scenario?

The answer is pretty simple. You follow some established models. Over the years, based on organizational performance, human nature, and psychology, several models have been formulated that aims to give you a clear line of sight while making any significant decision. These decisions might be on a personal level or an executive one, whatever it might be, the proven techniques will significantly help you to reduce wrong calls in high stake decisions.

The Rational Model

The rational model is called the classical model. And like all classical things, this model is the most widely used one for decision making. This model has several steps that are required to be followed. Those are –

  • Identifying the constraint
  • Accumulating and organizing relevant information regarding the constraint
  • Analyzing the constraint and its impact
  • Come up with a number of options
  • Assigning values to the options based on their feasibility
  • Selecting the options based on the assigned value
  • Acting decisively on the option.

This is a very holistic model based on scientific ground. This model essentially reduces the hassle of working with assumptions or guesses. The decision in this model is based on valuation from data gathered through relevant information. As a result, the decisions made using this model has fewer chances of being wrong. In an organizational aspect, this model is viable since the management can actually visualize the success rate of an option and can decide whether to act on it or not.

On the downside, this model is time-consuming. This model is not suitable for a situation where the decision has to be made instantly or where there is a lack of sufficient data. This model is best suited for large scale organization that has all the relevant data and time to their disposal

The Intuitive Model

As the name suggests, this model is unlike the classical model. Here decisions are not made on an objective basis, that is, in most cases, the decisions are not backed up by data, rather the decisions are made on a subjective basis. But there is no need to think that it’s all guess and intuition in this model. though some form of intuition is involved in his process, it still encompasses some basic structure. That includes –

  • Recognizing the pattern
  • Recognizing the similarity
  • Salience

Unlike the rational model, there is really no step by step process in this model. As a result, it is not time-consuming like that of the classical model. it allows for quick decisions incorporating a person’s positive emotion and experience. Since it doesn’t integrate the steps in its process, it is possible to look at the entire constraint as a whole and take definitive actions.

But it also comes with its drawbacks. A good part of this process depends on the experience of the decision-maker as well as their emotion. So a bad emotion or lack of experience can certainly cloud the entire assessment process resulting in catastrophic wrong decision making for the organization.

The intuitive model is basically seen to be used by CEOs who are resistant to change, or who feel their experience and ideas about the market and product will certainly cut them the profit even if they follow their gut instincts.

The Recognition Primed Model

So we have seen two models above. Each has its distinct pros that make them suitable for certain bases. But what if you could have the best of both worlds? That is where the recognition primed model comes into play. This model basically combines the classical model and the intuitive model to produce a model that is efficient as well as backed up by data and processes. In this model –

  • The manager or CEO assesses a scenario.
  • The decision-maker then follows the intuitive model to create a mental action script that basically outlines the steps of the classical model as the plan of action.
  • He then assesses whether the option plays out till its conclusion.
  • If there are any flaws in the existing action plan, it gets replaced with another option and the process continues until a viable option is not reached.

This is a very safe approach for any decision-maker lacking experience. The combination of playing out scenarios and assessing options as well as recognizing the pattern makes it much easier to reach a definitive conclusion.

However, this is also a very time-consuming process as the trial and error method can get very lengthy.

No matter which of the above models you choose, it is of no doubt that it will help you to achieve better organizational proficiency as well as ensure that bad decisions are avoided in most cases.

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