The different decision-making models you need to know — and their pros and cons
Big or small, decisions can alter things at all levels. Below, we’ll explore some of the most prevalent decision-making models, including their pros and cons, so you can find an approach that suits your management style.
The mark of any good manager is being able to make the right decision at the right time, even in less-than-ideal circumstances. Regardless of sector and industry, it’s an important element of any management role, having the potential to impact employees as well as the direction a company might take going forward.
Big or small, decisions have the power to alter things at both a micro and a macro level. Whether it’s the snacks served at a meeting or a change in company culture, management has a lot to weigh up when it’s crunch time.
There are several different decision-making models that managers can employ when needed. Here, we’ll explore some of the most prevalent theories, including their pros and cons, to see which could be the correct approach for your management style.
Decision-making sounds like a relatively simple idea. After all, everyone has to make decisions in their lives. But many managers often disregard just how important the process really is.
Models and styles aside, let’s boil down decision-making to its basic essence. You have goals that need identifying, you need to gather the relevant information to inform that decision, and you’ll have to weigh up any alternatives before reaching the decision.
In a business context, following a formal process of decision-making lets businesses make more informed, considered decisions that set specific actions in motion. Doing so provides a handful of benefits too, reducing second guessing, providing formal processes that can be shared up and down the chain of command, and engaging employees through more effective collaboration.
Information needs for decision-makers
So, what goes into making a decision? While not all decisions are created equal, they generally require the same informational ingredients before reaching a resolution. When it comes to reaching a decision, you need to know how to act if you’re to move forward. That means keeping the following in mind:
Objective: To reach a decision, the decision-maker must determine the objective. What problems and issues stand in the way of reaching this objective, and how are you going to overcome these problems?
Resources: What can you use that will help you reach the decision? Whether it’s financial or human capital, knowing which resources are at your disposal can make the decision-making process go a lot smoother.
When it comes to financial resources, make sure you know how much capital is available, how it can be spread across the process, and any back up reserves you can fall back on – should the decision not go to plan.
Alternatives: A singular approach to reaching the objective might not cut it. Back-ups, contingencies, and alternatives are therefore a crucial part of decision-making. However you carry it out, thorough analysis of each possible decision’s outcome will ensure you have alternative routes to explore if things don’t properly work out.
Leadership: Once you’ve reached a decision, having the confidence to act on your plans is key. As well as your own leadership, you should be aware of the leadership skills of others within the company. Bringing them into the decision-making process could improve your chances of success and make things go a lot more smoothly as a result.
Time frames for taking action in the decision process
Decision-making and time don’t always make for the best of bedfellows. It’s no secret that decision-making can take up vast amounts of time. And when time is against you, it can lead to rushed, hasty choices – especially if you have to make several decisions over the course of a single day.
This is decision fatigue in action. The mental cloudiness that can accumulate often means impulsive actions rather than considered, informed decisions. So, while the time frame will differ from decision to decision, there are certainly things we can do to reduce decision fatigue – and reduce the amount of time we spend on making decisions.
Make fewer decisions: The cumulative effect decisions have on us can be exhausting. Try minimising that tiredness by reducing the number of decisions you have to make throughout the day. Streamlining our choices leaves us with more mental energy to place on bigger, more important choices.
Delegate decisions to others: We can reduce the number of decisions to make by delegating them to employees in the same way we can delegate tasks to them. Asking others to take care of decisions not only frees you up, but it allows employees to feel empowered and be more engaged in their work.
Make decisions in the morning: In the afternoon, that post-lunch feeling can make us feel tired and sluggish. In the evening, risky hasty decisions are more likely to happen. The morning, however, can lead to accurate, well-thought-out decisions. If you’ve a big decision that needs all your attention, try taking care of it in the AM.
Give yourself deadlines: Over the course of a project, there’s bound to be a few last-minute decisions that don’t get the attention they deserve. To combat this, try creating mini deadlines. Doing so allows you to act earlier than you normally would, replacing hasty, eleventh-hour decisions with smart, well-informed choices long before the project’s end is in sight.
The different decision-making models
The Rational Model
Often cited as the classical approach, the rational model of decision-making is the most commonly used method, and typically consists of the following steps:
Identification of the problem or opportunity
Gathering and organising relevant information
Analysing the situation
Developing a range of options
Evaluating and assigning a value to each option
Selecting the option you feel is the best
Acting decisively on that option
The pros of the rational model
The rational model allows for an objective approach that’s based on scientifically obtained data to reach informed decisions. This reduces the chances of errors, distortions, and assumptions, as well as a manager’s emotions, that might have resulted in poor judgments in the past.
This means that, due to the step-by-step methodology, decision-makers are equipped to deal with difficult problems in complex environments.
The cons of the rational model
The process is sometimes constrained by insufficient information, which creates problems if a manager has to consider, and then evaluate, any alternatives they need to reach a decision.
Time limitations can also be an issue. Since there’s a lot of information needed, the necessary time for observation, collection and analysis is also essential. In a fast-paced business environment where time is crucial, the rational model is somewhat limited.
It’s also an approach that tends to err on the side of caution. By limiting decision-making based on what’s only available, you may not be able to take the risks necessary for success.
Which companies use the rational model?
Larger innovation companies in Sweden, such as Volvo and Ericsson, adhere to the rational model, using structured processes to manage their processes, often collaborating with a huge amount of people, all with differing expertise.
The Intuitive Model
Compared to the objective judgments of the rational model, the intuitive decision-making model is much less structured and opts for more subjective opinions – though it’s not simply based on gut feelings. Rather, it takes into consideration the following:
Pattern recognition – seeing patterns in events and information, and using them to figure out a course of action
Similarity recognition – seeing similarities in previous situations and recognising the cause and effect of a given situation
Salience – understanding the importance of information and the way it can affect personal judgment
The pros of the intuitive model
Compared to the rational model, intuitive decision-making allows for quick decisions to be reached, while a degree of gut feeling means managers can eliminate counter-intuitive ideas in reaching their decision.
Since it takes into account the person’s emotions, it ensures that positive feelings are used to their advantage, leveraging them as a way to motivate you through the process.
As opposed to the structure of the rational model, which progresses through steps, the intuitive model opts to see everything as a bigger picture. As a result, intuition can help managers to integrate pieces of isolated data, facts and figures to form a cohesive vision of what needs to be done.
The cons of the intuitive model
The intuitive model leans heavily on a person’s experience and judgment. As a result, emotions and bad or insufficient experience may end up clouding judgment and make for poor, impulsive decisions.
Which companies use the intuitive model?
Intuition and its model of thinking can’t really be quantified in any measurable way. Nevertheless, gut instinct has its fair share of proponents, none more so than perhaps Malcolm Gladwell, the author and public speaker who has written at length on the idea.
When we think of leaders who trusted their instincts, we think of people like Henry Ford or Bill Allen, the CEO of Boeing in the 1950s, who bet $16 million in order to achieve civilian air travel as we know it today. We can even see it in the present, with people like Uber CEO Travis Kalanick, a controversial figure who has stuck to his guns despite heavy resistance to charging customers more for the service.
The Recognition Primed Model
A combination of the two models above, the primed model of decision-making begins when a manager quickly assesses a situation, compares it to past situations, recognises patterns and creates a mental ‘action script’ which runs through the scenario up until its conclusion.
This then leads to two options:
The decision-maker finds no flaw in their scenario and sets about their chosen course of action as outlined by the script they devised.
The decision-maker encounters a problem in their action script. They then start over with a different script, repeating the process until a scenario successfully plays out.
An experienced decision-maker will have more developed recognition patterns, with more past scenarios to draw from to form their action script. Less experienced decision-makers, meanwhile, may look more towards troubleshooting the mental scenarios instead.
The pros of the recognition primed model
Since rational and intuitive reasoning is used, it provides a degree of mental simulation from your predictions. From here, you can prevent problems should they arise because they’ve been played out mentally beforehand.
The cons of the recognition primed model
Inexperienced managers may opt for this model when one of the other two models would be more appropriate in certain situations, such as for non-critical decisions.
The trial-and-error approach makes it relatively time-consuming. If time is of the essence, a manager may pick the first course of action, which may be unsatisfactory.
Which companies use the recognition primed model?
As well as in business, the model is highly effective for leaders affiliated with firefighters, search and rescue units, and other emergency services.
Click here for the latest news and features from Gazprom Marketing & Trading or visit our homepage to find out about our latest career opportunities.
The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Marketing & Trading. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Marketing & Trading accepts no liability for any errors, omissions or representations.