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Decision Making Model in Business
Leaders in industries need to make decisions from time to time. Given the many inadequacies and shortfall in information available regarding the issues to be decided, leaders require certain degree of discretion in strategizing and formulating decisions for optimum results. Over the years, leaders have relied on decision making models in business to account for this very critical aspect of business endeavor, which have proven useful in a whole lot of ways.
Over the years, scholars have developed decision making models which when properly applied will help decision makers and leaders in industries to make and implement correct decisions which will impact their business positively.
Types of Decision Making Models
A number of models of decision making have been in existence for a long time. These enable decision makers to identify all alternatives available to them, as well as evaluate and rank them objectively to ascertain which decisions best serve the purpose at hand. Decision making model examples include:
- Classical model of decision making, also known as the normative model of decision making: This approach is based on four assumptions: a clearly defined problem, no uncertainties, access to full information and considers the decision maker to have the capacity to make rational decisions.
- Administrative model of decision making: This is based on the idea that decision makers would often settle for a solution that isn’t totally ideal, but one which is considered to be just above the minimal option obviously because of the lack of time.
- PACED decision making model: This encourages decision making by considering five items: the problem, alternatives, criteria, evaluate alternatives and finally decision making.
- Incremental model of decision making: This breaks down the seemingly bid decision making process into a series of steps and “muddles through” each step until a valid decision is reached.
- Herbert Simon’s model of decision making: This considers the problem using the approach of intelligence to identify the problem, design, to create alternatives and choice, to make a solution.
- Vroom’s decision making model: This situational theory of problem solving as developed by Vroom – Yetton argues that the best approach to decision making is inherently contingent to the given situation. It considers five different style including autocratic type 1, autocratic type 2, consultative type 1, consultative type 2, and group based styles.
- Intuitive decision making models: This involves the apparent use of the “sixth sense” in decision making. Individuals use analytics and available facts through a series of steps to come to a decision.
- Decision analysis model: This model incorporates the use of psychology, management techniques, training as well as economics in a systematic, quantitative and visual manner to solve problems.
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Why Apply Decision Making Models in Businesses
Organization decision making models can come in quite handy in making balanced, impartial and unimpaired decisions. A lot of people are of the opinion that the core essence of management is essentially for decision making. It becomes very necessary at any given time, to consider more alternatives while making decisions as against sticking to one point of view. It is to this effect that the concept of managerial decision making models were propounded. It not only seeks to present a clearer perspective on the decision to be made, it literally walks you through the problem.
In this article, we will consider a number of decision making models that will aid you in making brilliant decisions which will take your business forward.
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Rational Decision Making Model
Having its roots deep in the economic behavior in the first half of the 21st century, this model of managerial decision making seeks to provide a means for decision making which is most appropriate in the achievement of set goals by employing inherently rational decision making steps. Managers would first obtain complete information regarding the matter at hand, consider the varying alternatives and come up with a valid decision which will be in the best interest of the business.
This became a highly accepted view at the time, but was wrought with serious flaws and draw backs brought to light by the fact that it may be difficult and even very costly to gather all necessary information as pertaining to a particular issue.
Regardless of the setbacks, this model provides certain ground rules and set a standard against which decision making patterns can be compared.
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Hebert Simon’s Model of Decision Making
A couple of scholars in the 60s and 70s made a lot of contributions to enhance our understanding of the complex issue of decision making today. One of such scholar was Hebert Simon. His contributions were key to unravelling the rather ambiguous idea of business decision making. He propounded a decision making model in business comprising three stages.
1. Intelligence
This deals with identifying and collecting relevant information on the problem.
2. Design
Here, alternative solutions are generated and geared towards solving the problem.
3. Choice
This entails selecting the best solution from amongst a number of alternatives.
Although this is rather more complex than it looks since each step may present scenarios in which the problem may portend a plethora of objectives which will lead to greater difficulty and uncertainty in making correct choices.
Small businesses are often partnership based, and the idea of collective gathering of information, resources as well as capital by likeminded individuals portends long-term success for the business. Since partners share all financial losses as well as gains, it is only natural for all stakeholders to participate in decision making. A lot of online collaborative tools like Sinnaps Project Management Software makes the idea of shared decision making for businesses even more conducive. With this, you can easily complete tasks, share ideas, and make effective long-term decisions with far-reaching and positive outcomes for the business.
Shared decisions are often encouraged in businesses since it inspires openness and dissuades conflicts among team members or partners.
The decision making models as listed above are an invaluable tool in business today. If you’d rather use them in simple daily decisions, or apply them in complex organizational business choices. Whatever the case, you stand to gain far greater benefits when you factor them into your everyday decision making procedures than when you not.
