C.

RATIONAL DECISION MAKING PROCESS

RATIONAL DECISION- Rational decision-making is a process in which decision-makers go

through a set of steps and processes and choose the best solution to a problem. These
decisions are based on data analysis and logic, eliminating intuition and subjectivity.

The Rational Decision-Making Process

The rational decision-making process involves careful, methodical steps. The more
carefully and strictly these steps are followed, the more rational the process is. We’ll
look at each step in closer detail.

Ideas that Complement and Contrast with Rational Decision Making

the rational method might entirely discount factors that are of known and obvious value,
such as emotions and feelings, experience, or even ethical principles. This danger,
along with other limitations of the rational method, has led to the development of the
following concepts to provide a more balanced and holistic approach to decision
making:
 1. Prospect Theory - is a complex analysis of how individuals make decisions when
there is risk involved. Most strictly rational approaches to questions of financial risk rely
on the principle of expected value, where the probability of an event is multiplied by the
resulting value should the event occur. Notice the numerical and logical approach to that
analysis. Daniel Kahneman and Amos Tversky, the developers of prospect theory.

2. Bounded Rationality- This concept revolves on a recognition that human

knowledge and capabilities are limited and imperfect. Three specific limitations
are generally enumerated:

 Decision makers do not have access to all possible information relevant to the
decision, and the information they do have is often flawed and imperfect.
 Decision makers have limited analytical and computational abilities. They are not
capable of judging their information and alternatives perfectly. They will inevitably
make misjudgments in the evaluation process.
 Decision makers do not have unlimited time to make decisions. Real-life situations
provide time constraints in which decisions must be made.

3. Heuristics- One of the approaches that might stem from a recognition of

bounded rationality is the use of heuristics. These are analytical and decision-
making tools that help simplify the analysis process by relying on tried and tested
rules of thumb. A heuristic simplifies a complex situation and allows the decision
maker to focus only on the most important pieces of information.
 4. Robust Decisions- Robust decisions revolve around the inability to predict
the future with certainty. Rather than rely on an imperfect analysis to determine
the “best” decision, a robust decision provides a plan that will work in light of
numerous uncertainties. It supposes that a number of situations are all possible
and provides a solution pathway that will be successful if any of those situations
should arise. This pathway could potentially be a single solution that works in any
of the likely future scenarios, or it might provide separate responses to be
enacted depending on how the future uncertainties unfold.

Evidence-Based Decision Making

- a strategic and deliberate method of applying empirical knowledge and research-supported

principles to justice system decisions made at the case, agency, and system level.

1. Descriptive Analytics- The focus of this type of analytics is simply to understand and
describe what has taken place as revealed by data sets. The analyst attempts to explain what
the data reveals about the events that have occurred, the relationships between different events
and market forces, and why the numbers are what they are.

2. Predictive Analytics- The practice of predictive analytics should also be subjected to

the discipline of evidence-based principles. That is, not only should guesses be made about the
likelihood of future outcomes based on present trends, but also those predictions should be
verified by actual examples from similar situations in the past—as much as possible, at least.
 D. Using a Decision Tree
Decision trees are useful tools, particularly for situations where financial data and
probability of outcomes are relatively reliable. They are used to compare the costs and likely
values of decision pathways that a business might take. They often include decision alternatives
that lead to multiple possible outcomes, with the likelihood of each outcome being measured
numerically.

How to Construct a Decision Tree

A decision tree is a branched flowchart showing multiple pathways for potential

decisions and outcomes. The tree starts with what is called a decision node, which
signifies that a decision must be made.

A decision tree includes the following symbols:

 Alternative branches: Alternative branches are two lines that branch out from one decision on
your decision tree. These branches show two outcomes or decisions that stem from the initial
decision on your tree.

 Decision nodes: Decision nodes are squares and represent a decision being made on your tree.
Every decision tree starts with a decision node.

 Chance nodes: Chance nodes are circles that show multiple possible outcomes.

 End nodes: End nodes are triangles that show a final outcome.

A decision tree analysis combines these symbols with notes

explaining your decisions and outcomes, and any relevant values to
explain your profits or losses. You can manually draw your decision
tree or use a flowchart tool to map out your tree digitally.

EXAMPLE:
From the decision node, a branch is created for each of the alternative choices under
consideration. The initial decision might lead to another decision, in which case a new decision
node is created and new branches are added to show each alternative pathway for the new
decision. The result is a series of decision pathways. The flowchart might include only one or
two decisions with only one or two alternatives, or it can become a complex sequence of many
decisions with many alternatives at each node.

How to Make Calculations with a Decision Tree

1. each decision usually involves costs
2. The other numerical data that needs to be provided is the probability of each
outcome from the uncertainty nodes. If an uncertainty node has two branches
that are both equally likely, each should be labeled with a 50 percent, or 0.5,
probability. Alternatively, an uncertainty node might have three branches with
respective probabilities of 60 percent, 30 percent, and 10 percent. In each case,
 the total of the percentages at each uncertainty node will be 100 percent,
representing all possibilities for that node.
3. With this numerical data, decision makers can calculate the likely return value for
each decision pathway. The value of each final outcome must be multiplied by
the probability that the outcome occurs. The total of the possibilities along each
branch represent the total predicted value for that decision pathway. The costs
involved in that decision pathway must be subtracted to see the final profit that
pathway represents.

E. Managing Group Decision Making

Decision making in group settings is quite common because most businesses recognize
the potential benefits of group participation in the process.

Advantages of Group Decision Making

- the sum of the knowledge, skills, creativity, and expertise in a group setting will always
be greater than that of any individual member. If this greater resource base can be
properly accessed and harnessed, the result should be a greater number of more
diverse and higher-quality solution idea
- the ability to evaluate those ideas should be improved by group collaboration.
- group participation also provides the significant benefit of increased understanding of the
issue and the decision amongst the team members.
- group members have a legitimate opportunity to participate in the decision-making
process, they will be far more likely to support the decision. They were a part of the
process, had the opportunity to help shape the decision, and will probably take greater
“ownership” of and exhibit more “buy-in” to the decision.

Disadvantages of Group Decision Making

- All the group members must invest their time in the process, and the group discussion
and interaction is more time-consuming than individual decision-making processes. The
number of man-hours involved can be relatively high, and the larger the group, the
higher that number
- One common pitfall is groupthink. This is the tendency of group members to conform to
and support a proposed group position. Perhaps an outspoken individual strongly favors
a decision, and other group members allow themselves to be persuaded simply because
of his forcefulness.
- Groups can also sometimes exhibit a tendency to polarization, meaning their decisions
move toward extremes that the individuals alone might not be comfortable supporting.
 The group setting can cause individuals to feed on the excitement or enthusiasm of one
another and move toward those extreme positions.
- there is also the danger that groups with sharply divergent perspectives can struggle to
agree on a course of action that they can all support.
- the entire group is accountable, but this also means that no individual will be personally
and directly accountable, which can be problematic at times.

Ways to Facilitate Group Decision Making

1. Brainstorming is an idea-generating process that specifically encourages all
alternatives while withholding any criticism of those alternatives. Therefore, this
technique can help build a group’s cohesiveness because all members are encouraged
to contribute and participate in the process without fear of judgment.

2. nominal group technique is similar to brainstorming, in that it encourages all members

to contribute their ideas. However, it is different from brainstorming in that it limits
discussion during the decision-making process. Group members are all present but
members operate independently and use the following four-step process in idea
generating:

1. Members independently write down ideas on a given problem.

2. Each member presents one idea to the group. Each member takes a turn,
presenting a single idea, until all ideas have been shared.
3. The group engages in discussion on the ideas for clarity and evaluation.
4. Each member independently rank-orders the ideas. The idea with the highest
aggregate ranking determines the final decision.

3. e-brainstorming, where people respond to issues via their computers in real time. The
responses and rankings are all anonymous and displayed for everyone to view and to
add further comments. The advantages of e-brainstorming are the possibility of lots of
generated ideas, anonymity, honesty, and speed. The major disadvantage is the
reduction in group cohesiveness.

4. devil’s advocacy decision-making technique is where an individual or a group is

selected to become the critic in the proposed decision. The biggest strength to using the
devil’s advocate technique is the ability to prevent groupthink. The devil’s advocate
technique allows for in-depth dialogue on a range of ideas and can help bridge
seemingly irreconcilable opposites. This process can help the group refine its thinking
and produce high-quality ideas

5. a neutral facilitator or referee can be used to separate participant and leadership roles
or groups with opposing ideas. The facilitator manages group processes and dynamics
and calls for a high degree of neutrality about content issues and a focus on group
 needs. The facilitator is focused on what needs to be accomplished and appropriate
levels of participation, all in an effort to ensure quality decisions are made.

6. Delphi technique (named after the Oracle at Delphi), experts respond to questionnaires
in a number of rounds. Questions narrow in on a specific topic as the rounds progress.
The first questionnaire consists of open-ended questions and aims to identify broad
issues related to the issue at hand. The responses are analyzed qualitatively by sorting,
categorizing, and searching for common themes. These responses are then used to
construct the second questionnaire, which is more specific and aims to rate or rank the
items in terms of their significance.

7. Affective conflict is when the dialogue becomes “personal” and people become more
aggressive or start to disengage. The mindset moves from “we have a problem” to “you
are the problem.” Opposition is seen as something to be thwarted rather than explored.
The goal becomes winning for its own sake rather than the best possible solution

8. Cognitive conflict is where people focus on the tasks or issues and debate and thrash
these out and come to a creative solution. The parties might argue and exchange views
vigorously, yet there is two-way communication and an openness to hearing each other.
The goal is to find the best possible solution rather than to win the argument. Alternative
perspectives are seen as valuable rather than threatening.

Evaluating Group Decision-Making TechniqueS

e- Devil’s Referee/
Effectivenes Brainstormin
Nominal Brainstormin Delphi Advocat Facilitato
s Criteria g
g e r

Number of
Moderate High High High Low Low
ideas

Quality of Moderat
Moderate High Moderate High High
ideas e

Moderat
Speed Moderate High Low Moderate High
e

Potential for
Moderat
interpersona Low Moderate Low High Moderate
e
l conflict

Commitment Moderat
Not applicable Moderate High Moderate High
to solution e

Group
Moderat
cohesivenes High Low Low Moderate High
e
s
The Final Decision
One of the basic requirements is to make the decision-making process clear. There are different
options, of course, and different settings and preferences might lead to selecting one of three
options: command, democratic, or consensus. When an organization has a centralized
decision-making structure, the “command” preference will dictate that the leader will make the
final decision.
democratic method is when all group members are given equal authority in a formal voting
system. Even then, there are choices. A decision might be accepted by a simple majority or
unanimity might be required.
Consensus enables the discussion of current and potential obstacles, already known to
participants, resulting in work-arounds to be built into a decision in advance. Defining that
process from the start will help everyone know what to expect.