Evaluating and Choosing Solutions
For many years, decision making was studied mainly by economists who made several assumptions about how people choose among alternatives. They assumed that decision makers have well-articulated and agreed-on organizational goals. They also assumed that decision makers are rational thinking machines who efficiently and simultaneously process facts about all alternatives and the consequences of those alternatives. Finally, these theorists assumed that decision makers always choose the alternative with the highest payoff. These were only hypothetical assumptions, but this rational perspective laid the foundation for popular misconceptions about how people make decisions.
Today, even the economists have cast off these unrealistic assumptions. Instead, they are recognizing that decision making includes a variety of human limitations. Over the past 40 years, organizational behavior researchers have debunked several economic assumptions about decision making.
Problems with Goals
We need clear goals to choose the best solution. Goals identity "what ought to be" and, therefore, provide a standard against which each alternative is evaluated. In reality, though, organizational goals are often ambiguous or in conflict with each other. The problem is compounded when organizational members disagree over the relative importance of these goals. It is also doubtful that all decisions are based on organizational objectives; some decisions are made to satisfy the decision makers personal goals even when they are incompatible with the organizations goals.
Problems with Information Processing
People do not make perfectly rational decisions because they don't process information very well. One problem is that perceptual biases distort the selection and interpretation of information. Thus, decision makers are not aware of every piece of information because the selective attention process screens much of it out.
Second, decision makers can't possibly think through all of the possible alternatives and their outcomes, so they engage in a limited search for and evaluation of alternatives. For example, there may be dozens of computer brands to choose from, but people typically evaluate only a few of these.
Third, decision makers typically look at alternatives sequentially rather than examine all alternatives at the same time. As a new alternative comes along, it is immediately compared to an implicit favorite. An implicit favorite is an alternative that the decision maker prefers over the others. In some cases, this option Is unconsciously chosen long before the formal decision process begins. The implicit favorite becomes a comparison against which all other alternatives are judged. This might be fine, except that people unconsciously distort information to make their implicit favorite come out the winner in most comparisons."
Problems with Maximization
Decision makers tend to select the alternative that is acceptable or "good enough," rather than the best possible solution. In other words, they satisfy rather than maximize. Satisfying occurs because it isn't possible to identify all of the possible alternatives, and information about available alternatives is imperfect or ambiguous. Satisfying also occurs because decision makers tend to evaluate alternatives sequentially. They evaluate alternatives one at a time against the implicit favorite and eventually select an option that is good enough to satisfy their needs or preferences. What constitutes a good enough solution depends on the availability of acceptable alternatives. Standards rise when acceptable alternatives are easily found and fall when few are available.
Choosing Solutions More Effectively
It is very difficult to get around the human limitations of making choices, but four strategies worth considering are systematic evaluation, decision support systems, scenario planning, and possibly intuition.
Systematic evaluation
Biased choices due to implicit favorites and satisfying tend to occur with overall subjective judgments of alternatives. A preferred alternative is to systematically evaluate alternatives through careful measurement and calculation. This procedure has four steps: (1) identify the relevant factors against which the alternatives are judged; (2) measure the alternatives on each factor; (3) weight the importance of each factor; and (4) compute an overall score for each alternative based on the weights and ratings for each factor.
For example, to choose the best job applicant, interviewers would rate each applicant on specific factors (communication skills, technical knowledge, etc.), then calculate a total score for each applicant using those factor ratings and the weights given to each factor. This minimizes the implicit favorite and satisfying problems that occur when relying on general subjective judgments. It also aids information processing because the calculations are made on paper rather than in our heads.
Decision Support Systems
Decision support systems are computer-based programs that guide people through the decision-making process. For example, software developer Cemer Corp. uses a case-based reasoning process at its help desk. Callers' problems or questions are entered in simple English and the system replies with questions and eventually solutions to the problems presented. This decision support system cut in half Cerner's backlog of unresolved client issues and increased customer satisfaction ratings to record high levels. Notice that this decision support software turns a seemingly non-programmed decision into a programmed decision. It helps employees to systematically identify the problem, which then points to a ready-made solution without the need to evaluate alternatives.
Scenario Planning
Scenario planning is a disciplined method for imagining possible futures. It typically involves thinking about what would happen if a significant environmental condition changed, and what the organization should do to anticipate and react to such an outcome. To some extent, scenario planning explores potential problems and opportunities. But it is also a vehicle for choosing the best solutions under possible scenarios long before they occur.
Should We Rely on Intuition?
Systematic evaluation, decision support systems, and scenario planning are highly rational ways to choose alternatives more effectively. But many corporate leaders will tell you that they also rely on their intuition. "If I have to make a big decision, I listen to what others think," explains Deborah Triant, CEO of Check Point Software Technologies. "But ultimately, I listen to my intuition. I postpone a decision until I wake up one morning and know where my gut is going." Intuition is the ability to know when a problem or opportunity exists and to select the best course of action without conscious reasoning. There is plenty of debate about the value of intuition. Deborah Triant and many other executives swear by their intuition, whereas some scholars warn against this practice.
Which of these views is correct? Both. It is true that we sometimes justify biased and non-systematic decision making as intuition. However, there is also increasing research evidence that intuition is the conduit through which people use their tacit knowledge. That tacit knowledge is subtle information acquired through observation and experience that is not clearly understood and therefore cannot be explicitly communicated. This knowledge incorporates logical reasoning that has become habit over time. Thus, intuition allows us to draw on our vast storehouse of unconscious knowledge.
Consider grand chess masters who play against several people at the same time. They look at the chessboard, make a move without time to systematically evaluate the situation, and proceed to the next chessboard. Chess masters make the right choice (most of the time) because they have learned patterns of chess arrangements and are able to quickly sense a pattern that threatens their position or presents an opportunity. Experienced decision makers in organizations have this same skill. They sense the best solution without consciously thinking through their preference. Certainly, we need to be careful that our "gut feelings" are not merely perceptual distortions and false assumptions, but we should also recognize the potential value of intuition in making sound choices.