Individual
decision making by managers can be described in two ways. First is the rational
approach, which suggests how managers should try to make decisions. Second is
the bounded rationality perspective, which describes how decisions actually
have to be made under severe time and resource constraints. The rational
approach is an ideal managers may work toward but never reach.
RATIONAL APPROACH
The
rational approach to individual decision making stresses the need for
systematic analysis of a problem followed by choice and implementation in a
logicial step-by-step sequence. The rational approach was developed to guide
individual decision making because many managers were observed to be
unsystematic and arbitrary in their approach to organizational decisions.
According to the rational approach, the decision process can be broken down
into the following eight steps.
1. Monitor
the Decision Environment. In
the first step, a manager monitors internal and external information that will
indicate deviations from planned or acceptable behavior. He or she talks to
colleagues and reviews financial statements, performance evaluations, industry
indices, competitors activities, and so forth. For example, during the
pressure-packed five-week Christmas season, Linda Koslow, General Manager of
Marshall Field’s Oakbrook, Illinois, store, checks out competitors around the
mall, eyeing whether they are marking down merchandise. She also scans printouts
of her store’s previous day’s sales to learn what is or is not moving.
2.
Define the Decision Problem. The manager responds to deviations by identifying
essential details of the problem: where, when, who was involved, who was
affected, and how current activities are influenced. For Koslow, this means
defining whether store profits are low because overall sales are less than
expected, or because certain lines of merchandise are not moving as expected.
3.
Specify Decision Objectives. The manager determines what performance outcomes should
be achieved by a decision.
4.
Diagnose the Problem. In this step, the manager digs below the surface to
analyze the cause of the problem. Additional data may be gathered to facilitate
this diagnosis. Understanding the cause enables appropriate treatment. For
Koslow at Marshall Fields, the cause of slow sales may be competitors marking
down of merchandise or Marshall Fields’s failure to display hot-selling items
in a visible location.
5.
Develop Alternative Solutions. In this step, alternative courses of action are
identified that may achieve decisional objectives. The manager may seek ideas
and suggestions from other people. Koslow’s alternatives for increasing profits
could include buying fresh merchandise, running a sale, or reducing the number
of employees.
6.
Evaluate Alternatives. This step may involve the use of statistical techniques
or personal experience to assess the probability of success. The merits of each
alternative are assessed as well as the probability that it will reach the
desired objectives.
7.
Choose the Best Alternative. This step is the core of the decision process. The
manager uses his or her analysis of the problem, objectives, and alternatives
to select a single alternative that has the best chance for success. At
Marshall Fields, Koslow may choose to reduce the number of staff as a way to
meet profit goals, rather than increase advertising or markdowns.
8. Implement
the Chosen Alternative.
Finally, the manager uses managerial, administrative, and persuasive abilities
and gives directions to ensure that the decision is carried out. The monitoring
activity (step 1) begins again as soon as the solution is implemented. For
Linda Koslow, the decision cycle is a continuous process, with new decisions made
daily based on monitoring her environment for problems and oppurtunities.
The
first four steps in this sequence are the problem identification stage and the
next four are the problem solution stage of decision making, as indicated in
exhibit 11.1. All eight steps normally appear in a manager’s decision, although
each step may not be a distinct element. Managers may know from experience
exactly what to do in a situation, so one or more steps will be minimized. The
following case illustrates how the rational approach is used to make a decision
about a personnel problem.
In
the preceding case, issuing the final warning to Joe DeFoe was a programmable
decision. The standard of expected behavior was clearly defined, information on
the frequency and cause of DeFoe’s absence was readily available, and
acceptable alternatives and procedures were described. The rational procedure
works best in such cases, when the decision maker has sufficient time for an
orderly, thoughtful process. Moreover, Alberta Manufacturing had mechanisms in
place to implement the decision, once made.
When
decisions are nonprogrammed, ill defined, and piling on top of one another, the
individual manager should still try to use the steps in the rational approach;
but he or she often will have to take short cuts by relying on intuition and
experience. Deviations from the rational approach are explained by the bounded
rationality perspective.
