Chapter 9.2: Decision-making models

Question 1

What are the different types of decision-making approaches?

Answer 1

1. The classical model
2. The administrative model
3. The political model

Question 2

What is the classical model?

Answer 2

The classical model of decision making is based on rational economic assumptions and manager beliefs about what ideal decision making should be. It is about how managers SHOULD make decisions.

The four assumptions underlying this model are as follows:

• Decision maker operates to accomplish known goals that are agreed upon.
• Decision maker strives for condition of certainty and gathers complete information. All alternatives and the potential results are calculated.
• There is a known criteria for evaluating alternatives.
• Decision maker is rational and uses logic.

Question 3

What is the administrative model?

Answer 3

The administrative model is a descriptive approach to decision making, so how managers ACTUALLY make decisions.

There are two concepts that shape the model: The bounded rationality & satisficing. The administrative model relies on assumptions different from the classical model and focuses on organizational factors that influence individual decisions.

• Decision goals often are vague, conflicting and lack agreement among managers. Managers are often unaware of problems or opportunities in the organization.
• Rational procedures are not always used. Managers must live with BOUNDED RATIONALITY.
• Managers’ search for alternatives are limited (time/money).
• Managers settle for a SATISFICING rather than a maximizing the best solution.
• Intuition; looks at past experience

Question 4

What is bounded rationality?

Answer 4

Bounded rationality means that people have boundaries on how rational they can be. Organizations are very complex and managers have the time and ability to process only a limited amount of information at a time.

Question 5

What is satisficing?

Answer 5

Satisficing means that they have to choose the first solution alternative that satisfies minimal decision criteria, because managers do not have the time of the cognitive ability to process complete information about complex decisions.

Question 6

What is the political model?

Answer 6

The political model is useful for making non-programmed decisions when conditions are uncertain, information is limited and there are manager conflicts about what goals to pursue and what kind of action to take. The political model closely resembles the real environment in which most managers and decision makers operate and therefore need to be engaged in COALITION BUILDING. Decisions are complex and involve many people, information is ambiguous and disagreement and conflict over problems and solutions are normal. The model has 4 basic assumptions:

• Organizations are made up of diverse interests, goals and values. Managers disagree about priorities and do not understand or share each other interests and
  goals.
• Information is ambiguous and incomplete. The attempt to be rational is limited by the complexity of many problems.
• Managers do not have the time or resources to identify all the dimensions of the problem.
• Managers engage in the push and pull of debate to decide goals and alternatives.

Question 7

What is coalition builiding?

Answer 7

Coalition building is building an informal alliance among managers who support a specific goal.