Making Rational Decisions

Making Rational Decisions
Making Rational Decisions

Decision making refers to making choices among alternative courses of “action” or “inaction”. As you know, the key to positive human relations is communicating and applying your emotional intelligence (EQ) skills such as self-awareness in decision making.  As a rule, we do not spend much time on mundane decisions, but some decisions require a lot of thought otherwise we might have to deal with unpleasant or even major consequences. Unique and important decisions require conscious thinking, information gathering, and careful consideration of our options.

In business context, decisions can be classified into three categories based on the level at which they occur: “strategic decisions” that set the course of an organization,  “tactical decisions”, i.e. decisions about how things will get done, and “operational decisions” which refer to decisions that employees make each day to make the company run. The key factor in making the right decisions is a person’s ability to use his emotional intelligence (EQ) to make sure that the right decision is made.

The model, which entails a series of steps enabling us to weigh the pros and cons of our decisions and to maximize the quality of the outcomes, is called “rational decision making model”.  In other words, if we want to make sure that we have made the best choice, going through the formal steps of the rational decision-making model may make sense.

The first step in making a decision is actually knowing what you want. In step two, you’ll need to decide which factors are important to you and evaluate all the potential options for obtaining or purchasing the thing that you want. Before you move too much further in your decision-making process, you need to decide how important each factor is to your decision. If each of the factors is equally important, then there is no need to weigh them, but let’s say if the price is a key factor, you might weigh your options while keeping in mind the other criteria that are of medium importance. In step four, you will need to generate all alternatives about your options. Then, in step five, you need to use this information to evaluate each alternative against the criteria you have established and choose the best alternative.

The outcome of this decision will influence the next decision that you will make, for example, if you have bought a car and have nothing but problems with it, it will be unlikely that you will consider the same make and model when purchasing your next car.

The rational decision-making model has important lessons for decision makers. First, when making a decision, you may want to make sure that you have set your criteria before looking for alternatives. This would prevent you from liking one option too much and setting your criteria accordingly. Having criteria before you search for alternatives may prevent you from making such mistakes.

Another advantage of the rational model is that it urges a decision maker to generate many alternatives instead of only a few. By generating a large number of alternatives that cover a wide range of options, you are unlikely to make an effective decision without sacrificing one criterion for the sake of another.

Despite all its benefits, “rational decision-making model” involves a number of unrealistic assumptions, i.e. that people completely understand the decision to be made and know all the available choices, they have no biases, and want to make optimal decisions.

According to Nobel Prize–winning economist Herbert Simon the rational decision-making model, although a helpful tool in assisting decision makers to work through problems, doesn’t represent “how people make decisions”.

Think about how you make important decisions in your life. How likely is it that you complete all the steps in the rational decision-making model? You will most likely find the process time consuming, and might even be under time pressure to make a decision. Moreover, even if you had access to all the information you needed, it might not be feasible to compare the pros and cons of each alternative and rank them according to your preferences. Anyone who has ever bought a laptop computer or a cell phone can attest to the challenge of sorting through the list of features of each brand and model and arriving at the solution that best meets their needs.

Moreover, you may not always be interested in reaching an optimal decision, for example, if you are looking to purchase a house, you may be willing and able to invest a great deal of time and energy to find your dream house, but if you are only looking for an apartment to rent, you are more likely to be willing to take the first one that meets your criteria of being clean, close to campus or work and within your price range. This is making “good enough” decisions, i.e. knowingly limiting your options to a manageable set and choosing the first acceptable alternative. Thus, we save time and effort by accepting the alternative that meets the minimum threshold.

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