WARWICK BUSINESS SCHOOL, UNIVERSITY OF WARWICK 2009-10
IB 1180- Management, Organisation and Society 1
Can a decision ever be truly ‘rational’? Evaluate this question drawing on the examples and theories given in the lectures.
Introduction
“There are no decision problems in paradise! Paradise offers a happy, but aimless life. ” (Gr�nig & K�hn, 2009) Everything in the real world is influenced by decisions. Today, individuals, companies, organizations or institutions are all daily confronted with decision problems. Finding right solutions is often essential in order to achieve progress and in the end, the long-term success (Gr�nig & K�hn, 2009). This essay explores different theories of decision making and the aim of this essay is to answer the question, what are the different approaches in solving decision problems, and if it can ever be only a rational process.
Definition of a decision problem
A decision problem can be defined as a situation, in which there is a difference between the desired (targeted) position and the current position. (Gr�nig & K�hn, 2009) Decision problems can be divided into the many different groups and some of them are explained here. The decision problems can be divided into the choice and design problems. (Gr�nig & K�hn, 2009). Choice problems are ones, where the solutions are known from the beginning. The decision maker is choosing one of the options. Design problems, however, have an infinite number of ways how they can be solved and the decision maker is generating the possible solutions. Furthermore, it can be distinguished between problems, which can be solved independently and problems in decision sequences.( Gr�nig & K�hn, 2009) When choosing the best option in the independent problems, the consequences are already known. A decision sequence, in contrary, appears where by solving a problem, the number of other different problems emerges and further decisions are needed. There were attempts to formulate a universal decision making theory in the past, and this essay will introduce and analyze some of them.
Rational comprehensive model
This model outlines decision making as a complete rational process, in which a “rational individual” (Mar��l, 2007) makes decision based only on logical thinking with a capability to obtain all the alternative possibilities and evaluate all the consequences of each one of these actions. Despite the fact that this model is considered to be a myth today and it was criticized by many of the researchers, it is still used in some aspects of explaining a decision making process. A reason to this can be interpreted with a notion of rationality ingrained in history (Mar��l, 2007). Many philosophers were trying to come with a clear explanation of rationality and how, or if are people capable of using only this feature when dealing with different issues. Starting with Aristotle, who believed, that logical thinking is what distinguishes people from animals. (Mar��l, 2007) In addition, the Enlightenment philosophers were trying to quantify rational thinking and logical positivists of 20th century agreed with the scientific investigation principles of the Enlightenment philosophers and transformed it into the set of logical and mathematical operations. (Mar��l, 2007) Although, these views were exposed to a great criticism in the 20th century, the theory of rational thinking is still used in many debates in the 21th century. (Mar��l, 2007) In general the rational process of decision making is explained as a sequence of the steps, which go as follows:
- 1. Definition of the problem
- 2. Determination of the goals of efforts
- 3. Identification of all the possible alternative solutions to meet the goals
- 4. Evaluation of different solutions against the set goals
- 5. Decision making
- 6. Implementation and Monitoring (Peterson, 2007)
The requirement of setting a goal is an important part of the whole decision making process. The definition of the problem is usually related to the goals, which want to be reached or improved. The evaluation is done by comparing the alternative solutions with the criteria, that have been established when setting the goals and trying to find the best alternative. (Gr�nig & K�hn, 2009). As it was already stated, it is impossible to consider the rational comprehensive model as accurate because of the various limitations and constraints. The decision making steps of the rational model although, are still trying to be obeyed when concluding a decision. The limitations in human thinking will be explained below.
Bounded rationality
Bounded rationality theory was formed by Herbert A. Simon. Unlike other models, which were trying to find an optimal solution to the problem, Simon in his model has taken into account, that humans are not capable of gaining all the information about the problem, due to the limited computational capacity, the lack of time and other constraints, which keep the person from thinking purely on the rational basis and thus, the person cannot find the optimal solution. (Hoffrage & Reimer, 2004, p. 441) Simon (1955, 1956) argued that because of all these limitations, people make decisions, which are “partly rational” and not absolutely rational.”(Simon, 1955, 1956, cited in Mansourian & Ford, 2007, p. 682) �Full rationality requires unlimited cognitive capabilities. Fully rational man is a mythical hero who knows the solutions of all mathematical problems and can immediately perform all computations, regardless of how difficult they are” (Selten, 2001, cited in Mansourian & Ford, 2007, p. 682). Human capabilities are quite different. Therefore human decision making cannot be considered fully rational.
Because the rational comprehensive model cannot be considered in real life situations, we consider bounded rationality as highly rational. (Maitlis & Ozcelik 2004, p.376) Although, when all the choices are being evaluated in order to find the satisfactory one, individual is driven be his/ her feelings expected after making a selection. This way the importance of emotions can be implied in this rational model. (Maitlis & Ozcelik 2004, p.376)
Satisfying over optimizing
In the rational comprehensive model, it was expected to consider all the alternative solutions before making a decision. This can be called an optimization method, although it is not possible to put into practise in the real life. Satisfying can be explained as defining a minimal set of criteria, that decision maker looks for when solving a decision problem. Limits in the decision maker’s mental capacity in comparison with the complexity of the decision environment are known and therefore it is not in the decision maker’s capability to consider all the alternatives. (Dequech 2001, p. 913) In evaluating the possible alternative solutions, the first alternative, which meets the set criteria, is usually chosen. (Mingus, 2007). Decision maker usually applies “satisfying” rather than “optimizing” when concluding his/her decision. He finds solutions that are “good enough.” According to Simon (1957, cited in Dequech, 2001, p. 913) “human behaviour is intendedly rational but only limitedly so.”
In most of the real situation, it is impossible to deliberate all of the outcomes of the problem and therefore decision maker looks for a satisfactory alternative. How are the levels of criteria that define “satisfactory” set? If it is very easy to find suitable alternative solutions for current problems, the standards of satisfying are raised, but if the search continues for a long time without any possible solutions found, the standards are lowered. (Simon, 1997, p.296) When evaluating this process, it can be said, that the decision maker inclines to the set of criteria that are easier reachable, but not without effort. This mechanism, according to Simon (1997, p. 296), uses much simpler computations in comparison with optimization.
Several advantages of satisfying over optimizing were defined. One example of this in decision making is when in the search for the solutions, we found only the ones, which contain pleasant consequences as well as unpleasant. In this case, decision maker usually does not make a decision but tries to avoid solutions like this. One way of avoiding can be approached by refusing to choose any of the alternatives and start the search all over again by looking just for options, which will satisfy all the participants and which will ensure the satisfaction among all the set goals. This process can be included to the definition of satisfying as well. (Simon, 1997)
Recent psychological studies have shown that people are familiar with the feeling of happiness or regret they will experience after making a decision. Damasio’s (1999, cited in Maitlis & Ozcelik, 2004) research on patients with frontal lobe damage suggests that emotions are not only taken into account when deciding, but that decision is not even possible without them.
Another research made on musicians in orchestras (Taylor et. al. 1995, cited in Maitlis & Ozcelik 2004) shows that decisions based on performance assessment in work plays an important role in the self identity because of how the self-identity and profession-identity are closely linked. (Levine and Levine 1996, as cited in Maitlis & Ozcelik 2004, p. 377) This relation has been noticed not only in music profession, but also in law, medicine, science where “incumbents often derive considerable meaning about who they are from their professional identity. ” (Wallace 1995, Zabusky & Barley 1997, cited in Maitlis and Ozcelik 2004, p. 377).
Phenomenon of a groupthink
Another example that proves that decision making is not only a rational process is a phenomenon of a groupthink.
A groupthink can be explained as behaviour of individual in a particular group, which seeks such concurrence in his/her actions that often neglects the importance of critical thinking and avoids considering alternative ways of solutions. (Janis, 1971) One of the key characteristics of a groupthink phenomenon is the uniformity of the opinions, obeying old rules, which can be not working out in order to remain cohesiveness. A feeling of acceptance by a group is what every member wishes. Recent studies shows, that unlike we would assume, that the more cohesiveness and the greater feeling of acceptance by a group, the more deviations of members occur. In reality, the more cohesive group, the less unconformity within is observed. It is because the members actually believe more in the proposals of the majority or the leader, when the feeling of unity is emphasized. (Janis, 1971 p. 85)
In addition, according to Chapman (2006), anxiety occurs quite often in the groupthink model, but also in the individual decision making.
A numerous researches have been carried out observing decision making under anxiety. It is the negative emotion, feeling of fear usually with orientation to future (Chapman, 2006, p. 1396). Anxiety can have a major affect on decision making. A decision maker usually does not process information as accurately as in the state of normal thinking and sometimes the attention is drawn away from solving the decision problem and the decision maker focuses more on the overcoming the anxiety (Chapman, 2006, p. 1396). According to Chapman (2006), a groupthink phenomenon often occurs in group as a defence model against anxiety. It can be explained with the groupthink main characteristic- concurrence seeking, when members are trying to overcome anxiety by seeking the support from other members of the group. This is a negative effect because when concluding a decision under a groupthink phenomenon, important aspects of the problem are not considered critically, which often results in poor decision outcome. (Chapman, 2006, p. 1400) In overcoming groupthink phenomenon it is crucial for managers to recognise emotions that affect their group and the decisions made by the group that are biased because of this. Furthermore, it is important for managers to find the ways how to deal with this phenomenon and undertake the appropriate steps in order to avoid future decisions to be concluded under the negative emotions of the group. (Chapman, 2006, p. 1402)
It has been also proved, that emotions and mood affect the amount of risk in decision making. When doing research on the risk taking, researchers found out that people tend to take less risks when in good mood and vice versa. This can be explained by a fact that people with positive mood tend to take less risks because of the possible failure, which would negatively influence their mood, while people with negative mood want to feel better and are therefore willing to take more risks. (Chapman, 2006, p. 1396)
Conclusion
The purpose of this essay was to explain how human beings conclude their decisions and what affects them. According to the literature I have examined, I can suggest that emotions play an important role when making a decision. Despite the fact, that human is a rational being; it is not in their capability to pursue only a rational way of thinking when considering consequences of their actions. In the past people thought that the decision making process is prevalently rational. With the development of psychological and sociological researches, it was understood, that decision making process has a rational basis, but it is always influenced by the variety of different non rational aspects, which determine its shape. In my essay I have tried to explain some of them.
References:
Chapman, J. 2006. Anxiety and defective decision making: an elaboration of the groupthink model. Management Decision. 44 (10), pp. 1391 – 1404.
Dequech, D., 2001. Bounded rationality, institutions and uncertainty. Journal of Economic Issues, 35 (4), pp. 911-929
Gr�ndig, R. & K�hn, R., 2009. Succesful decision making: A systematic approach to Complex Problems. 2nd ed. Springer-Verlag Berlin Heidelberg
Hoffrage, U. & Reimer, T., 2004. Models of bounded rationality: The approach of fast and frugal heuristics. Management Revue. 15 (4), pp. 437- 459
Janis, I. L., 1971. Groupthink. Psychology Today. Available at: http://apps.olin.wustl.edu/faculty/macdonald/GroupThink.pdf
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Mansourian, Y. & Ford, N., 2007. Search persistence and failure on the web: a “bounded rationality”and “satisficing” analysis. Journal of Documentation. [online] 63 (5), pp. 680- 701.
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Mar��l, G., 2007. Decision making: An overview of theories, contexts, and methods. In: G. Mar��l, ed. 2007. Handbook of decision making. Boca Raton (FL): CRC Press. Ch. 1
Maitlis, S. & Ozcelik, H., 2004. Toxic Decision Processes: A Study of Emotion and Organizational Decision Making. Organization Science, [Online] 15, pp. 375-393
Available at: http://www.jstor.org/stable/30034744
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Mingus, M. S., 2007. Bounded rationality and organizational influence: Herbert Simon and the behavioral revolution. In: G. Mar��l, ed. 2007. Handbook of decision making. Boca Raton (FL): CRC Press. Ch. 1
Peterson, S. A., 2007. Evolution, cognition and decision making. In: G. Mar��l, ed. 2007. Handbook of decision making. Boca Raton (FL): CRC Press. Ch. 7
Simon, H. A., 1997. Bounded Rationality. Models of Bounded Rationality, 3, The MIT Press
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