APPROACHES TO DECISION-MAKING

The decision making process can be explained by three approaches. They are (1) rationality, (2) Bounded rationality, and (3) intuition.

(1) Rationality

Rationality is a prescriptive approach that tells managers how they should make decisions. Managerial decision making is assumed to be rational. Effective decision making requires a rational choice of a course of action. Rationality can be defined as the ability to follow a systematical, logical, thorough approach in decision making. A decision maker who is rational would be fully objective and logical. He would define a problem carefully and would have a clear and specific goal. The steps in the decision making process would consistently lead towards selecting the alternative that maximizes that goal.

(2) Bounded Rationality

Herbert A Simon was one of the first people to recognize that decisions are not always made with rationality and logic. His view of decision making now called administrative model. It is a normative approach, which describes how decisions are actually made. Managers are often faced with uncertainty and non-programmed decision making situation.

(3) Intuition

Our intuition can assist decision making, particularly when ther is not enough time for a more organized analysis. Intuition is the personal characterstics that influences decision making. Intuition is the ability to know when a problem or opportunity exists and to select the best course of action