Decision Maker and the Rational Man

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Decision Maker and the Rational Man I. Decision Maker and the Rational Man 1. Introduction As individuals we face decision situations everyday. It might be a problem or an opportunity, but in both cases the individual has to come at a perfect decision. At a rational view individual will try to gather as much information as possible on the available alternatives and the consequences they might derive by implementing each alternative. Individuals think and reason before they act and they try to select the best alternative accessible to them. What is most important is to select a choice among the alternatives available. Any person who is faced a significant choice problem in real life, operating individually or organizationally, tends to complete the task according to the prescription by the rational choice. In words, he will think as a rational man as depicted in a textbooks of economics. Rational man will be reasonably directed toward the achievement of conscious goals and will aim to maximize his benefits. 2. Literature Review Decision making is a means to an end. It is typically described as “choosing among best alternatives”. According to Stoner et al. (2001: 239), decision making is the process of identifying and selecting a course of action to solve a specific problem. It is about identifying and choosing solutions that lead to a desired end result (Kreitner and Kinicki, 1995:299). The process begins with a problem and ends when a solution had been chosen. Decision maker is the individual or group that actually makes the choice among alternatives. Individual decision making is an important part of organizational behavior as well as in day to day life of any individual. Ideal decision makers try to use all their talents when making a decision and characterized by reason and sound judgment (Certo, 2003). Over the years, there has been much debate on how to accurately describe decision making processes in general. Beyond an implicit agreement that decisions are made through some sort of process, chaotic or otherwise, there is little else scholars agree upon. By simple definition rational means efficient, i. . , maximizing output for a given input, or minimizing input for a given output. Economic definition of the rational man refers solely to a man who moves toward his goals in a way which, to the best of his knowledge, uses the least possible input of scarce resources per unit of valued output (Downs, 1957). Human behavior is goal-oriented, chosen for a reason. Goals, objectives, purposes, and interests explain behavior. So under rational man concept human being is always behave in a way to maximize the value he gains through the end. Managerial decision making is assumed to be rational. That means managers make consistent, value–maximizing choices within specified constrains. So that is where the decision maker and rational man come together. The rational model of decision making which is also known as classical model is best used to discuss about the behavior of a manager who weight his options and calculate optimal levels of risks before making the decision. Rational decision making describes choices that are consistent and value maximizing within specified constraints (Robbins and Coulter, 2002:178). It assumes that managers have access to all the information needed to reach a decision (Certo, 2003). The rational model proposes that managers use a rational, four-step sequence when making decisions: (1) identifying the problem, (2) generating alternative solutions, (3) selecting a solution, and (4) implementing and evaluating the solution (Kreitner and Kinicki, 1995:301). This model is based on the premise that managers optimize when they make decisions. A decision maker who is perfectly rational would be fully objective and logical (Robbins and Coulter, 2002:178). He or she will carefully define the problem and will have a defined goal which is clear and specific. Moreover making decisions using rationality would consistently lead toward selecting the alternative that maximizes the likelihood of achieving that goal. However in the rational decision making model there are some assumptions of rationality which apply to any decision. Figure 1: Assumptions of Rationality Source: Robbins and Coulter, 2002:178 The rational decision making model, amongst its many assumptions assumes that there is a single best solution that will maximize the desired outcomes. But in the real world individuals must make decisions within tight time constraints and with less information than he or she likes to have. Bounded rationality theory pointed out that decision makers must cope with inadequate information about the nature of the problem and its possible solutions, a lack of time or money to complie more complete information, an ability to remeeber large amount of information, and the limits of their own intelligence (Stoner et. al. ,1995:253). That means the deciison maker is acturally deviates form being a rational man. Instead of exploring the perfect or ideal solution, decision makers frequently settle for one that will adequately serve their purpose. That means they sacrifice rather than maximize. Not only bounded rationality, intuition also play a vital role in a decision maker’s life. Decision makers usually use their intuition to improve their decision making. It’s a subconscious process of making decisions on the basis of experience and accumulated judgment (Robbins and Coulter, 2002:180). This can be simply known as “gut feeling” and will deviates decision maker from behaving rationally. It comes with experience and learning. For example a manager who had faced a similar situation of decision making might deviate from systematic approach of rational decision making and might use his or her experience and judgment to take a decision. Figure two talks about the role of intuition in decision making. Figure 2: What is intuition? Source: Robbins and Coulter, 2002:180. The quality of a manager’s decisions is important for many reasons. To illustrate some, the quality of a manager’s decisions directly affects his career opportunities, rewards, job satisfaction and achievements in life. Also the quality of managerial decisions contributes to the success or failure of an organization. As a decision maker, the way he behaves in a decision situation will directly affect to that individual’s future as well as to the future of the institution for which he makes the decision. The rational decision theory position that decision making should proceed systematically through the series of steps is sound. Better decisions likely result when decision makers carefully analyze problems, evaluate multiple alternatives, and make systematic choices on the basis of their analyses and act as a rational man. However the perspective of rational decision making model relies on the implicit assumption that “rational decision maker” could have ever existed in a natural state in organizations. Decision making process is not a strictly rational one where all relevant information is collected and objectively evaluated, rather the decision maker takes mental ‘short cuts’ in the process of decision making to arrive at a sound decision (Kahneman and Tversky 1974 in Brabazon, 2000). 3. Application in Real World In Business Organizations. Decision making is one of the primary and most important responsibilities of being a manager. In real world most of the time a manager acts as a rational decision maker. He has to think about all the alternatives available to him after analyzing the problem and list down the consequences of each alternative. And then he has to rank each alternative from low to high to based on pros and cons of each alternative and finally he has to select the best alternative to solve the problem. For example at the Cuban Missile Crisis former United State President John F. Kennedy did his best to guide his team towards the best alternative available to them. He with his team gathered as much information as possible and probe for all the alternatives available. A special part of this is analyzing the consequences of each alternative. They did their best to see what will be the ultimate result of executing alternatives to select the best choice in front of them. This is the reason why even today after many years back, President Kennedy’s actions at Cuban Missile Crisis is considered and learned as a best managerial decision taken by a true leader all over the world. This can be considered under rational decision making but even here it is restricted within the available information. Any manager or an individual who is confronting with a problem or decision situation will act as a rational man to some extend when he or she makes a decision. Let’s take a simple example of buying a computer. In managerial aspects this can be a manager related to Marketing who is finding that they have to buy few computers with newest features in order to give the best customer service. After identifying the problem he will have to go through the decision criteria which will relevant to the decision. Here he can consider price, warranties, memory capacity, advance features, etc. rom the numbers of criteria available to him when buying a computer. Then the decision maker has to carefully analyze and weight each criterion according to its relevancy for the task. Then there will be the consideration of alternatives which will bring forward various computer brands and models and the manager will has to analyze each option with careful examination using all the information available to him. Then the manager has to come into a final decision by thinking rationally about the gains he will derive through each alternative. However a manager does not make decisions in isolation. When he or she makes their own decisions, people within and outside the organization also make their own decisions. When managers take decisions they also have to think about these decisions made by people around him. Also no approach to decision making can guarantee that a manager will always make the right decision. However a manager who is rational, intelligent and who uses a systematic approach towards decision making is more likely to come up with high quality solution than other managers. . Conclusion An individual as a decision maker will most of the time will behave in a rational way. He will do his best to select a choice among the alternatives available after analyzing each of these alternatives. However the extend of rationality of his behavior will be a problem due to the assumptions followed on the model of rational decision making which can be applied to the true situation. It assumes that the decision makers have or should or can obtain adequate information, both in terms of quality, quantity and accuracy. This applies to the situation as well as the alternative technical situations. It further assumes that the decision makers have substantive knowledge of the cause and effect relationships relevant to the evaluation of the alternatives. In other words, it assumes that decision maker has a thorough knowledge of all the alternatives and the consequences of the alternatives chosen. It further assumes that the personnel involved in decision making can rank the alternatives and choose the best of it. With these we can not say that there is a single, best solution that will maximize the desired outcomes. So when taking a decision, the decision maker will move towards compromising on the decision making process though it is a structured decision making model. The decision maker takes the decision or is assumed to choose a solution though not a perfect solution but “good enough” solution based on the limited capacity to handle the complexity of the situation, ambiguity and information. However a decision maker will behave as a rational man constraint to this bounded rationality. Reference List Borges Marcos R. S. , Pino J. A. , Valle C. , Support for Decision Implementation and Follow-up, 1995, Viewed on 15 May 2008, Borges, Marcos R. S. , Pino, J. A. , Valle, C. : On the Implementation and Follow-up of Decisions, 2002, Viewed on 15 May 2008, Downs Anthony, The Meaning of Rationality in the Model, 1957, Viewed on 15th May 2008m http://polsci. colorado. edu/~mciverj/Downs3-14. PDF Gosling Jonathan and Mintzberg Henry, The Five Minds of a Manager - Key ideas from the Harvard Business Review, Viewed on 15 May 2008, Jackson Susan E. , May Karen E. , Whitney Kristina, Understanding the Dynamics of Diversity in Decision-Making Teams, 1995, Viewed on 10 May 2008, Kreitner Robert and Kinicki Angelo, Organizational Behavior, 3rd ed. , Boston, Richard D. Irwin, 1989. Managementconsultingcourses. com, Managerial Decision Making, Viewed on 14th May 2008, Robbins Stephen P. , Organizational Behavior, 6th ed. , Englewood Cliffs, N. J, Prentice-Hall, 1993. Robbins Stephen P. , and Coulter Mary, Management, 7th ed. , Delhi, Pearson Education, 2002. Stoner James A. F. , Freeman Edward and Gilbert Daniel R. , Management, 6th ed. , Englewood Cliffs, N. J. , Prentice-Hall, 1995. Tarricone Pina and Luca Joe, Successful teamwork: A case study, 2002, Viewed on 14 May 2008, Tony Brabazon, Behavioral Finance: A new sunrise or a false dawn? , 2000, Viewed on 14 May 2008, ----------------------- The problem is clear and unambiguous. A single, well-defined goal is to be achieved. All alternatives and consequences are known. Preferences are clear. Preferences are constant and stable. No time or cost constraints exist. Final choice will maximize payoff. Lead to Rational Decision Making Intuition Experience based decisions Affect-initiated decisions Value or ethics based decisions Subconscious mental processing Cognitive-based decisions Managers make decisions based on their past experience Managers make decisions based on feelings or emotions Managers make decisions based on skills, knowledge and training Managers use data from subconscious mind to help them to make decisions Managers make decisions on ethical values or culture
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