Rational Decision-Making Model

The Rational Decision-Making Model is a process for making logically sound decisions. [Robbins, Stephen P., and Timothy A. Judge. Organization Behavior. 12th ed. Upper Saddle River, New Jersey: Pearson Prentice Hall, 2007. 156-158.] The model comes from Organization behavior.

Method

The Rational Decision Making emerges from Organizational Behavior. The process is one that is logical and follows the orderly path from problem identification through solution. The Rational Decision Making is a seven step model for making rational and logical reasons:

Define the problem

The very first step which is normally overlooked by the top level management is defining the exact problem. Though we think that the problem identification is obvious, many times it is not. The rational decision making model is a group-based decision making process. If the problem is not identified properly then we may face a problem as each and every member of the group might have a different definition of the problem. Hence, it is very important that the definition of the problem is the same among all group members. Only then is it possible for the group members to find alternate sources or problem solving in an effective manner.

Generate all possible solutions

The next step in the rational decision making process, after defining the exact problem, is to generate all the possible solutions. This activity is best done in groups, as different people may contribute different ideas or alternative solutions to the problem. If you are not able to generate alternative solutions, there is a chance that you might not arrive at an optimal or a rational decision. For exploring the alternatives it is necessary to gather information. Technology may help with gathering this information.

Generate objective assessment criteria

After going thoroughly through the process of defining the problem, exploring for all the possible alternatives for that problem and gathering information the third step says evaluate the information and the possible options to anticipate the consequences of each and every possible alternative that is thought of. At this point of time we have to also think over for optional criteria on which we will measure the success or failure of our decision taken.

Choose the best solution which we have already generated

Based on the criteria of assessment and the analysis done in step 3 choose the best solution which we have generated. Once we go through the above steps thoroughly, implementing the fourth step is easy job. These four steps form the core of the Rational Decision Making Model.

Other three steps

* Implement the chosen decision
* Evaluate the “success” of the chosen alternative
* Modify the decisions and actions taken based on the evaluation of step 6.

Requirements and limitations

However, there are a lot of assumptions, requirements without which the rational decision model is a failure. Therefore, they all have to be considered. The model assumes that we 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 you have or should or can obtain substantive knowledge of the cause and effect relationships relevant to the evaluation of the alternatives. In other words, it assumes that you have a thorough knowledge of all the alternatives and the consequences of the alternatives chosen. It further assumes that you can rank the alternatives and choose the best of it. The following are the limitations for the Rational Decision Making Model:

* It requires a great deal of time.
* It requires great deal of information
* It assumes rational, measurable criteria are available and agreed upon.
* It assumes accurate, stable and complete knowledge of all the alternatives, preferences, goals and consequences.
* It assumes a rational, reasonable, non – political world.

The Bounded Rational Decision Making Model: a realistic approach

The Rational Decision Making Model, amongst its many assumptions assumes that there is a single, best solution that will maximize the desired outcomes.

Now, the bounded rationality model says that the problems and the decisions are to be reduced to such a level that they will be understood. In other words, the model suggests that we should interpret information and extract essential features and then within these boundaries we take a rational decision.

The model turns 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 of the group leader to handle the complexity of the situation, ambiguity and information. The steps involved in the decision making are alike to the rational decision making process the model assumes that the perfect knowledge about all the alternatives are not possible for a human being to know. Hence, based on the limited knowledge he takes a good enough knowledge though not a perfect decision.

To cut the long story short we can say that the decision that is taken is rational but is taken in a bounded area and the choice of alternatives is though not perfect is nearer to the perfect decision. In rational process the assumption is that the exact problem, all the alternatives, should be thoroughly known to the decision maker. However, the realistic approach of human limitation is overlooked in rational decision making, but the same approach is considered mainly in the bounded rational decision making process.

Hence, it is also called as a Realistic Approach for Rational Decision Making Process.

Assumptions of the model

The rational decision making model contains a number of assumptions.
* Problem clarity: The problem is clear and unambiguous.The decision maker is assumed to have complete information regarding situation.
* Known options: It is assumed the decision maker can identify all the relevant criteria and can list all the viable alternatives. Furthermore, the decision maker is aware of all possible consequences of each alternative.
* Clear preferences: Rationality assumes that the criteria and alternatives can be ranked and weighted to reflect their importance.
* Constant preferences: It's assumed that the specific decision criteria are constant and that the weights assigned to them are stable over time.
* No time or cost constraints: The rational decision maker can obtain full information about criteria and alternatives because it's assumed that there are no time or cost constraints.
* Maximum payoff:The rational decision maker will choose the alternative that yields the highest perceived value.

ee also

*

References