Decision-Making Processes: The Challenges of Decision-Making

Introduction

Decision-making has become a critical step in any type of engagement. Indeed, the efficiency of decision-making affects everyone involved from those working in the corporate world to those in a non-governmental institution seeking ways to please its donors. Interestingly, making judgments is always perceived as a management issue whereas it affects even low ranking staff in a company. People have to make choices daily from the type of service providers to which they subscribe to the food they eat. All these go to show the importance of the decision-making process in life. In addition, it is critical to note that this process has several challenges. For example, information overload is the leading challenge for people tasked with making decisions for others. This essay looks into the challenge of making choices and uses four streams to bring out the process. The four streams are rational, heuristics and biases, fast and frugal heuristics, and naturalistic.

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Definition of Concepts

Defining Rationality

It is imperative to note that what can be rational for one person might not be for another. This is because, to some extent, rationality is closely linked with societal beliefs and customs. Tetlock and Mellers (2002) define rationality as a self-evident truth, which can be simplified further to mean a state of reason or logic. Kahneman (2003) conducted a study to determine what caused the difference between what one group considered rational and another did not. The study focused on systematic biases that the different groups portrayed. According to Kahneman (2003), many people believe that rationality and reasoning are the same things, when in fact, this is not true. The scholar discusses the differences between reasoning and intuition, and claims that when used correctly, both offer a powerful cognitive presence that, in turn, affects rationality. It is prudent to mention that whereas intuition is fast-paced and comes automatically, reasoning is slow and includes significant feedback to prove useful. Additionally, it is critical to note that the assumption that preferences are not affected by variations of rationality is wrong.

Defining Intuition

Intuition and rationality are often seen as two entirely different concepts while the reality is that they are interlinked. Khatri and Ng (2000) explain that intuition is an important part of decision making yet there is little research supporting the same. The scholars explain that systematic and careful analysis of situations does not always lead to efficient problem-solving. They go further and reiterate that any strategic decision-making should be guided by both rational and intuitive processes (Khatri & Ng, 2000). Burke and Miller (1999) use a study to explain the importance of intuition in making choices. Through their study, they reveal that a significant number of managers believe that intuition is best used for experience-based decisions. This would suggest that any new ventures that require choices should only use rational analysis. Additionally, the participants of the study believed that intuition-based choices are emotional, thus, by default, cannot be rational. Other terms that were used to define intuition included ethical and subconscious processing (Burke & Miller, 1999). One can argue that intuition is the acquiring and use of knowledge that is not based on conscious reasoning, taking all these definitions into account.

Defining Heuristics

Heuristics can be defined as simple rules that are adopted as humanity evolves. Polonioli (2013) explains that this concept encourages the resolving but not dissolving of issues concerning decision making. The premise suggests that the best way for making choices is by coming up with viable solutions for any challenges faced as opposed to removing the elements that are causing the problem. On the other hand, Katsikopoulos (2011) explains that psychological heuristics are models used to make inferences. Therefore, these models depend entirely on human capability such as the ability to imitate or remember distinct detail. It is critical to point out that using this definition, one can argue that heuristics do not rely on all available information before decision-making. Interestingly, the definition by Katsikopoulos closely links with that of Polonioli as both agree that this stream of making choices takes advantage of simple computations or rules. Because of their simplicity, therefore, heuristics are often easy to both explain to others and to understand. This makes it a go-to stream of decision-making for a majority of both managers and individuals.

The Four Decision-Making Approaches

The Rational Decision Making Approach

The rational decision-making approach is founded on the fact that strategic rules offer a fixed guideline on how things should be done. For instance, it is common to hear people use the term “rule of thumb” when stressing why they did something or why they chose a certain way of doing things. This methodology assumes that everyone adheres to the same rules of interaction, thus, understanding processes the same. Tetlock and Mellers (2002) explain that the tactic also claims that all decision-making is linear. The scholars add that the approach supports the argument that “If you prefer a lottery ticket with a 20% chance of winning $4,000 over one with a 25% chance of winning $3,200, you should also prefer a lottery ticket with an 80% chance of $4,000 over one that guarantees $3,200” (Tetlock & Mellers, 2002, p. 96). Additionally, the theory also assumes that everyone has the mental willingness to follow all rules without question.

Importantly, the approach does not support any form of bias as it is highly methodical and everyone involved has to adhere to the stated rules. Critically, the rational approach is recommended for usage when data has been collected and analysis is done. Thus, in businesses, this approach can be used after a market study or both baseline and end-line research surveys. Because the tactic relies heavily on logic, it is important that it is applied in situations that have a clear problem that fits within the rules agreed. One can argue that strategic decision-making encourages the listing down of all other alternative streams that can be used instead of the rational approach before making the required choice.

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One of the advantages of the theory is that it is scientific and as previously stated, uses data to make decisions. Arguably, this is why it worked initially as markets were not as diverse as they are today. Secondly, the approach removes bias from the process, making decision-making a more accountable and transparent process. This advantage is critical as it allows managers and companies to understand what went right, and what went wrong during the process. Indeed, the rational decision-making theory also reduces uncertainties as it provides clear guidelines that have to be used at all times. In turn, it is arguable that the tactic reduces human-based errors as it indicates reaction and expectation at each phase of the decision-making process. Many of the scholars that support this school of thought have also argued that it allows for quality choices as they can always be backed up by scientific data.

Despite all the advantages mentioned, this approach also has several disadvantages. First, it consumes a lot of time due to the fact that each component involved in the process has to be carefully deliberated before a decision is made. Arguably, today, time is among the most scarce yet valuable assets of any company, making this theory difficult to implement if time is of the essence. Secondly, the stream makes it impossible for leaders to adhere to the changing times, or the views of their staff/people. Due to its rigid nature, a significant number of people who use this approach are disliked by the people they manage. This can make the decision-making process tedious and enhance the lack of motivation for both the managers and the employees.

The Heuristics and Biases Approach

The Heuristics and Biases Approach encourages the use of simple and informal rules that are often adopted due to evolution or a constant way of doing things that work. This theory allows for flexibility in problem-solving and is much more suited for today’s business world. According to Bodemer, Hanoch, and Katsikopoulos (2015) the theory has been used in medical problem solving due to its ability to accommodate uncertainty. Therefore, one can argue that Heuristics and Biases Approach is founded on the uncertainty of the decision-making process. Interestingly, the heuristics and biases approach is also founded on rules of thumb just like the rational decision-making theory. The main difference between the two is that in the former, flexibility of the same rules of thumb is acknowledged and even encouraged. It is important to note that a constant way of doing things allows a team to understand some of the concepts that work or do not. Therefore, the same lessons can be seen as rules of thumb for that particular activity. For example, constant social media usage will prove that it is not advised to keep consumer queries for more than 12 hours as they lose interest. There might not be any scientific data proving this but experience becomes key in determining how long a query can go without being resolved before a client becomes impatient.

A key assumption of this theory is that biases are often for the good of the decision-making process. The theory predisposes that the people in charge of the problem solving have the best interests for the company, therefore, will only make good decisions. Debatably, the approach is best suited for fast decisions that are based on prior experiences. For example, a person is traveling from point A to point B on a Monday through road C. However, the person remembers that road C normally has a police roadblock every Monday, so he changes to road D. This person has used the heuristics and biases tactic to come to the conclusion that road D is better and faster.

One advantage of the theory is that, as previously stated, it allows for speedy reactions to problem-solving. Secondly, due to its flexibility, it can be used for impromptu decision-making and problem-solving. Arguably, the theory can also be applied by anyone who has experience in the activity at hand, ensuring that everybody in a team that is faced with a problem feels valued. In turn, this enhances the relationship between the team members and their management. It is also critical to point out that the theory encourages feedback from all parties included in the process. The feedback loop is important as it ensures that there is no bias in the choices made and that the said decisions are for the betterment of the organization. On the other hand, one of the disadvantages of the approach is that it requires prior knowledge and cannot be effectively used by people who have not been in similar situations before. This is a disadvantage because the world is ever-changing due to technological advancements that are a first for many people. Using this approach will, therefore, result in mistakes and human errs as in many instances, the involved do not have the required experience.

The Fast and Frugal Heuristics Approach

Just like the heuristics and biases approach, the fast and frugal heuristics theory is founded on the uncertainty of problem-solving processes. However, one key difference is that this theory focuses more on the recognition aspect of heuristics (Shah & Oppenheimer, 2008). Shah and Oppenheimer (2008) explain that heuristics and biases also include availability of information not just recognition of the problem. According to this theory, one simple and experience-based rule can be applied in various similar situations as they were initially. The premise means that the simple rule is adopted without change to the other situation. It is important to note that the theory claims that specific principles have to be established to guide the search for a solution (Shah & Oppenheimer, 2008). This means that these principles have to be in effect before the problem-solving process begins.

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Similar to the other discussed theories, the fast and frugal heuristics approach also makes several assumptions. The first is that the theory assumes that all similar situations are the same. This means that the tactic does not consider other external pressures that might make a similar-looking situation different. An example can be used to clarify this further. The social media manager of a company does not allow queries to go unanswered past 3 hours. On one occasion, the queries went unanswered for 4 hours because the account handler was sick and out for the day. On a separate occasion, the company’s social media platforms had been hacked and they did not have access. Whereas the two situations are similar in that there is a delay in the resolving of consumer queries, they are significantly different due to the external circumstances.

Sourcing for extra information during problem-solving is continuous. However, the approach assumes that heuristics also dictate when the people involved in the decision-making process stop looking for extra information (Shah & Oppenheimer, 2008). Indeed, there is no need for more information if a certain rule has been identified for use in problem-solving. However, critiques of this school of thought have stated that new information has proven critical in changing tactics in decision-making, therefore, extra information should be encouraged at all phases of the process. Thirdly, the theory presents the belief that all cues realized during the process can be rightfully processed and inferred. Lastly, the theory assumes that different people in similar situations will have the same experience and recognize the same things. Bearing all these in mind, one can argue that the best time for the usage of the fast and frugal heuristics theory is when there is limited time and all relevant information has been obtained.

One advantage of this approach, like the heuristics and biases, is that it is time effective. This allows it to be applied in any fast-moving process easily. Additionally, the approach is flexible and allows for different recognition heuristics to be incorporated into the same solution. This is supported by the fact that the theory assumes different people in a similar environment have the same experience, therefore, would suggest the same rules of the situation. One disadvantage of the theory is that it cannot be used if no one can remember the details of the similar situation. Additionally, testing usability will prove difficult as similar situations can be affected by external factors.

The Naturalistic Decision-Making Approach

As the name suggests, the naturalistic decision-making approach aims at understanding how people make choices in the real world considering the different pressures that they experience both before, during and after making those decisions. Unlike the other discussed theories, this one does not try to come up with strategies for the optimal way of making efficient decisions but instead, comprehend why people make the choices that they make based on the information, experience and scientific knowledge that they may or may not have at that particular time. The naturalistic decision-making approach has its foundations on the concept of diversity, where situations and people are different and several things have to be considered when making choices. Additionally, unlike the other approaches, this theory suggests that decision-making is not always done in a controlled setting (Klein, 2008). Indeed, this approach also allows for personal experiences in problem-solving, making it the most flexible of the four streams discussed.

One of the assumptions held by the supporters of this school of thought is that there is always time to incorporate all needed considerations when making a decision. As mentioned, the theory encourages scientific reasoning, intuition and personal experiences to be included in solution-finding. However, for all these elements to be considered fully, significant time will have to be allocated. This might not always work especially in sectors like medical surgeries where there is limited time to make a life or death decision. Secondly, it assumes that people do not share experiences at all and this makes everyone’s experience relevant in problem-solving. Arguably, there are people who will experience different things despite being in the same situation. However, it is also common to find people having the same understanding of the same situation. Arguably, the theory is best practiced in environments that are not controlled, thus, do not have to adhere to one specific way of doing things.

One advantage of this approach is that it brings together all possible considerations needed to make an effective decision. To some extent, therefore, it offers a higher chance of making the right choice than the other streams that have been discussed. Each of the different streams has its advantages and disadvantages. It is arguable that the naturalistic decision-making approach combines all these advantages for the benefit of the problem-solving process. Secondly, the theory allows for the tacit knowledge, which is deeply personal. This is an advantage as it allows the person/people with the closest interaction with the situation at hand to also be the ones involved in the decision-making. The flexibility of the approach makes it easily adaptable to different situations as well. Further, the approach uses contradictions to come up with problem-solving strategies as each consideration is carefully weighed against both scientific and tacit knowledge.

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On the other hand, one of the main disadvantages of the theory is that it is also not time-sensitive. As stated previously, in today’s workplace, decisions have to be made and problems resolved in the shortest time possible. The fact that this approach requires a long time puts it at a disadvantage compared to the other streams. Secondly, the theory encourages differentiation in thought among decision-makers who are encouraged to tap into their natural way of making choices. This can prove chaotic in the modern workplace as people will incorporate their personal biases into the process.

The Decision Making Context and the Appropriate Approach

As mentioned earlier, the decision-making process is complex and has evolved over time. There are various schools of thought on the best approach to use, however, after the discussions presented, it is clear that there is no single method that is appropriate for all situations. Indeed, the workplace is faced with various challenges and different strategies have to be used in order to lower the chances of negatively affecting the bottom line. This does not mean that problem solving should not be guided by rules. It is critical that a framework be adopted to ensure that everyone who is solving an issue does so for the benefit of the organization as a whole. One of the advantages of this is the fact that it allows everyone in the company to make choices with the company objectives in mind. Additionally, it ensures accountability and transparency in the problem-solving process. These guidelines are equally important in ensuring timely and effective decision-making. Bearing this in mind, it is not possible to pick one of the streams discussed as the most appropriate for all matters regarding decision-making.

Alternatively, a framework that combines the streams can be deemed suitable for efficient problem-solving. It is prudent to note that the decision-making context is diverse such that there are various elements of consideration. First, one has to consider the problem at hand and how it affects the company. Secondly, the involved have to consider how the problem affects the industry. Additionally, they have to consider all the external pressures related to the issue before coming up with the ideal strategy to resolve the problem. One thing that comes out clearly based on the discussion presented is the importance of context when solving a problem. The appropriate approach for any situation will incorporate both context and stream. If the context includes limited time, then the people involved cannot use the naturalistic approach. On the other hand, if the context requires personal experience, then management will have to use either one of the heuristics theories.

It is critical to note that intuition plays a critical role in the decision-making context. The scholars agree that there is a correlation between effective decisions and the amount of time that was used to come to those conclusions. Debatably, in the ideal decision-making context, the involved parties would have ample time to come up with their solutions. This is, however, rarely the case, and many decision-makers find themselves constantly pressed for time before they even start working on solutions. Therefore, in this day and age, intuition is used to fill the gap. Dane and Pratt (2007) go further to explain that there are different decision-making contexts in the same organization. It is common to find middle management using quantitative and scientific methods to make decisions as their choices are usually specific to what impacts their departments (Dane & Pratt, 2007). However, the same successful middle managers struggle when they are promoted to upper management, where they have to consider different departments in their problem-solving processes. Dane and Pratt (2007) argue that the main reason why these managers struggle at the top is the fact that they do not use intuition but still rely on their quantitative approaches. These methods cannot offer quality reasoning for complex situations.

Conclusion

In conclusion, several theories support decision-making processes. Some of these theories include rational, heuristics and biases, fast and frugal heuristics, and naturalistic approaches. Each of these theories offers advantages and disadvantages and their merits can only be applied based on the problem-solving context. For instance, a manager can use rational reasoning if the situation has scientific data involved. This approach is common when making decisions based on activities such as baseline surveys which give the involved parties the data they need to solve problems. It is critical to note that the mentioned context of decision-making also affects the applicability of each of the four streams mentioned.

References

  1. Bodemer, N., Hanoch, Y., & Katsikopoulos, K. V. (2015). Heuristics: Foundations for a novel approach to medical decision making. Intern Emergency Medicine, 10, 195–203.
  2. Burke, A. L., & Miller, K. M. (1999). Taking the mystery out of intuitive decision making. The Academy of Management Executive, 13(4), 91-99.
  3. Dane, E., & Pratt, G. M. (2007). Exploring intuition and its role in managerial decision making. Academy of Management Review, 32(1), 33–54.
  4. Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. The American Economic Review, 93(5), 1449-1475.
  5. Katsikopoulos, V. K. (2011). Psychological heuristics for making inferences: Definition, performance, and the emerging theory and practice. Decision Analysis, 8(1), 10–29.
  6. Khatri, N., & Ng, H. A. (2000). The role of intuition in strategic decision making. Human Relations, 53(1), 57-86.
  7. Klein, G. (2008). Naturalistic decision making. Human Factors, 50(3), 456–460.
  8. Polonioli, A. (2013). Re-assessing the heuristics debate. Mind Soc, 12, 263–271.
  9. Shah, K. A., & Oppenheimer, M. D. (2008). Heuristics made easy: An effort-reduction framework. Psychological Bulletin, 134(2), 207–222.
  10. Tetlock, E. P., & Mellers, A. B. (2002). The great rationality debate. Psychological Science, 13(1), 94-99.

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