Decision making

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Current revision as of 00:30, 2 May 2006

Decision making is the cognitive process of selecting a course of action from among multiple alternatives. Every decision-making process produces a final choice. It can be an action or an opinion. It begins when we need to do something but we do not know what. Therefore decision-making is a reasoning process which can be rational or irrational, and can be based on explicit assumptions or tacit assumptions.

Common examples include shopping, deciding what to eat, and deciding whom or what to vote for in an election or referendum.

Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behaviour that a decision has been made. Therefore we conclude that a psychological event that we call "decision making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we assume that people have made a commitment to effect the action.

Structured rational decision making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions. For example, medical decision making often involves making a diagnosis and selecting an appropriate treatment. Some research using naturalistic methods shows, however, that in situations with higher time pressure, higher stakes, or increased ambiguities, experts use intuitive decision making rather than structured approaches, following a recognition primed decision approach to fit a set of indicators into the expert's experience and immediately arrive at a satisfactory course of action without weighing alternatives.

Due to the large number of considerations involved in many decisions, decision support systems have been developed to assist decision makers in considering the implications of various courses of action. They can help reduce the risk of human errors. The systems which try to realize some human/cognitive decision making functions are called Intelligent Decision Support Systems (IDSS), see for ex. "An Approach to the Intelligent Decision Advisor (IDA) for Emergency Managers, 1999".

Decision making style

According to behavioralist Isabel Briggs Myers (1962), a person's decision making process depends to a significant degree on their cognitive style. Starting from the work of Carl Jung, Myers developed a set of four bi-polar dimensions. The terminal points on these dimensions are: thinking and feeling; extroversion and introversion; judgement and perception; and sensing and intuition. She claimed that a person's decision making style is based largely on how they score on these four dimensions. For example, someone that scored near the thinking, extroversion, sensing, and judgement ends of the dimensions would tend to have a logical, analytical, objective, critical, and empirical decision making style.

Cognitive and personal biases in decision making

It is generally agreed that biases can creep into our decision making processes, calling into question the correctness of a decision. Below is a list of some of the more common cognitive biases.

• Selective search for evidence - We tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions.
• Premature termination of search for evidence - We tend to accept the first alternative that looks like it might work.
• Conservatism and inertia - Unwillingness to change thought patterns that we have used in the past in the face of new circumstances. (See tradition.)
• Experiential limitations - Unwillingness or inability to look beyond the scope of our past experiences; rejection of the unfamiliar.
• Selective perception - We actively screen-out information that we do not think is salient. (See prejudice.)
• Wishful thinking or optimism - We tend to want to see things in a positive light and this can distort our perception and thinking.
• Choice-supportive bias occurs when we distort our memories of chosen and rejected options to make the chosen options seem relatively more attractive.
• Recency - We tend to place more attention on more recent information and either ignore or forget more distant information. (See semantic priming.)
• Repetition bias - A willingness to believe what we have been told most often and by the greatest number of different of sources.
• Anchoring and adjustment - Decisions are unduly influenced by initial information that shapes our view of subsequent information.
• Group think - Peer pressure to conform to the opinions held by the group.
• Source credibility bias - We reject something if we have a bias against the person, organization, or group to which the person belongs: We are inclined to accept a statement by someone we like. (See prejudice.)
• Incremental decision making and escalating commitment - We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision making. (See slippery slope.)
• Inconsistency - The unwillingness to apply the same decision criteria in similar situations.
• Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we attribute our failures to bad luck and external factors. We attribute other's success to good luck, and their failures to their mistakes.
• Role fulfillment - We conform to the decision making expectations that others have of someone in our position.
• Underestimating uncertainty and the illusion of control - We tend to underestimate future uncertainty because we tend to believe we have more control over events than we really do. We believe we have control to minimize potential problems in our decisions.
• Faulty generalizations - In order to simplify an extremely complex world, we tend to group things and people. These simplifying generalizations can bias decision making processes.
• Ascription of causality - We tend to ascribe causation even when the evidence only suggests correlation. Just because birds fly to the equatorial regions when the trees lose their leaves, does not mean that the birds migrate because the trees lose their leaves.

For an explanation of the logical processes behind some of these biases, see logical fallacy.

Cognitive neuroscience of decision making

The anterior cingulate cortex and orbitofrontal cortex are brain regions involved in decision making processes. A recent neuroimaging study, Interactions between decision making and performance monitoring within prefrontal cortex, found distinctive patterns of neural activation in these regions depending on whether decisions were made on the basis of personal volition or following directions from someone else.

Decision making in groups

Decision making in groups is sometimes examined separately as process and outcome. Process refers to the interactions among individuals that lead to the choice of a particular course of action. An outcome is the consequence of that choice. Separating process and outcome is convenient because it helps explain that a good decision making processes does not guarantee a good outcome, and that a good outcome does not presuppose a good process. Thus, for example, managers interested in good decision making are encouraged to put good decision making processes in place. Although these good decision making processes do not guarantee good outcomes, they can tip the balance of chance in favor of good outcomes.

A critical aspect for decision making groups is the ability to converge on a choice.

Politics is one approach to making decisions in groups. This process revolves around the relative power or ability to influence of the individuals in the group. Some relevant ideas include coalitions among participants as well as influence and persuasion. The use of politics is often judged negatively, but it is a useful way to approach problems when preferences among actors are in conflict, when dependencies exist that cannot be avoided, when there are no super-ordinate authorities, and when the technical or scientific merit of the options is ambiguous.

In addition to the different processes involved in making decisions, groups can also have different decision rules. A decision rule is the approach used by a group to mark the choice that is made.

• Unanimity is commonly used by juries in criminal trials in the United States. Unanimity requires everyone to agree on a given course of action, and thus imposes a high bar for action.
• Majority requires support from more than 50% of the members of the group. Thus, the bar for action is lower than with unanimity and a group of "losers" is implicit to this rule.
• Consensus decision-making tries to avoid "winners" and "losers". Consensus requires that a majority approve a given course of action, but that the minority agree to go along with the course of action. In other words, if the minority opposes the course of action, consensus requires that the course of action be modified to remove objectionable features.
• Sub-committee involves assigning responsibility for evaluation of a decision to a sub-set of a larger group, which then comes back to the larger group with recommendations for action. Using a sub-committee is more common in larger governance groups, such as a legislature. Sometimes a sub-committee includes those individuals most affected by a decision, although at other times it is useful for the larger group to have a sub-committee that involves more neutral participants.

Less desirable group decision rules are:

• Plurality, where the largest block in a group decides, even if it falls short of a majority.
• Dictatorship, where one individual determines the course of action.

Plurality and dictatorship are less desirable as decision rules because they do not require the involvement of the broader group to determine a choice. Thus, they do not engender commitment to the course of action chosen. An absence of commitment from individuals in the group can be problematic during the implementation phase of a decision.

There are no perfect decision making rules. Depending on how the rules are implemented in practice and the situation, all of these can lead to situations where either no decision is made, or to situations where decisions made are inconsistent with one another over time.

Principles

The ethical principles of decision making vary considerably. Some common choices of principles and the methods which seem to match them include:

• the most powerful person/group decides
  • method: dictatorship or oligarchy
• everyone participates in a certain class of meta-decisions
  • method: parliamentary democracy
• everyone participates in every decision
  • direct democracy, consensus decision making

There are many grades of decision making which have an element of participation. A common example is that of institutions making decisions which affect those they are charged to provide for. In such cases an understanding of what participation is, is crucial to understand the process and the power structures at play.

Decision making in one's personal life

Some of the decision making techniques that we use in everyday life include:

• listing the advantages and disadvantages of each option, popularized by Benjamin Franklin
• flipping a coin, cutting a deck of playing cards, and other random or coincidence methods
• accepting the first option that seems like it might achieve the desired result
• tarot cards, astrology, augurs, revelation, or other forms of divination
• acquiesce to a person in authority or an "expert"

An alternative may be to apply one of the processes described below, in particular in the Business and Management section.

Decision making in healthcare

In the health care field, the steps of making a decision may be remembered with the mnemonic BRAND, which includes

• Benefits of the action
• Risks in the action
• Alternatives to the prospective action
• Nothing: that is, doing nothing at all
• Decision

Path dependency

Main article: path dependency

It is perhaps pertinent to note that the cost of making no decision at all itself is a factor, and that the benefit of making some decision, even a random choice, can be beneficial in the longer term. Thus the reversibility of an action may be a good way to judge whether or not an action or process is beneficial. A resource can also be viewed as something expendable, or bearing a cost, rather than the implication of selecting something irrevocably.

Even life and death decisions have been priced this way, as in the insurance industry.

Decision making in business and management

In general, business and management systems should be set up to allow decision making at the lowest possible level.

Several decision making models for business include:

• Analytic Hierarchy Process - procedure for multi-level goal hierarchy
• Buyer decision processes - transaction before, during, and after a purchase
• Complex systems - common behavioural and structural features that can be modelled
• Corporate finance:
  • The investment decision
  • The financing decision
  • The dividend decision
  • working capital management decisions
• Cost-benefit analysis - process of weighing the total expected costs vs. the total expected benefits
• Decision trees
  • Program Evaluation and Review Technique (PERT)
  • critical path analysis
  • critical chain analysis
• Force field analysis - analizing forces that either drive or hinder movement toward a goal
• Grid Analysis - analysis done by compairing the weighted averages of ranked criteria to options. A way of comparing both objective and subjective data.
• Linear programming - optimization problems in which the objective function and the constraints are all linear
• Min-max criterion
• Model (economics)- theoretical construct of economic processes of variables and their relationships
• Monte Carlo method - class of computational algorithms for simulating systems
• Morphological analysis - all possible solutions to a multi-dimensional problem complex
• optimization
  • constrained optimization
• Paired Comparison Analysis - paired choice analysis
• Pareto Analysis - selection of a limited of number of tasks that produce significant overall effect
• Scenario analysis - process of analyzing possible future events
• Six Thinking Hats - symbolic process for parallel thinking
• Strategic planning process - applying the objectives, SWOTs, strategies, programs process
• Ubiquitous command and control is a concept for dynamic decision making based on "agreement between an individual and the world", and "agreements between individuals"

DECISION-MAKERS AND INFLUENCERS[[1]]

In the context of industrial goods marketing, there is much theory, and even more opinion, expressed about how the various `decision-makers' and `influencers' (those who can only influence, not decide, the final decision) interact. Decisions are frequently taken by groups, rather than individuals, and the official buyer often does not have authority to take the decision.

Miller & Heiman, for example, offered a more complex view of industrial buying decisions (particularly in the area of `complex sales' of capital equipment). They see three levels of decision-making:

'economic buying influence' - the decision-maker who can authorize the necessary funds for purchase
 
'user buying influences' - the people in the buying company who will use the product and will specify what they want to purchase
 
'technical buying influence' - the `experts' (including, typically, the buying department) who can veto the purchase on technical grounds
 

Webster and Wind,in a similar vein, identify six roles within the `buying centre':

'users' - who will actually use the product or service
 
'influencers' - particularly technical personnel
 
'deciders' - the actual decision-makers
 
'approvers' - who formally authorize the decision
 
'buyers' - the department with formal authority
 
'gatekeepers' - those who have the power to stop the sellers reaching other members of the `buying centre'

REFERENCES

R. B. Miller and S. E. Heiman, 'Strategic Selling ' (Kogan Page, 1989)

F. E. Webster and Y. Wind, 'Organizational Buying Behavior ' (Prentice-Hall, 1972)

D. Mercer, ‘Marketing’ (Blackwell, 1996)

See also

• Cognition
• Decision theory
• Group process
• Groupthink
• Majoritarianism
• Majority rule
• Mindset
• Minoritarianism
• Morphological analysis
• Online deliberation
• Rulemaking

References

• Myers, I. (1962) Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator, Consulting Psychologists Press, Palo Alto Ca., 1962.
• Emerson, P J. Beyond the Tyranny of the Majority, a comparison of the more common voting procedures used in both decision-making and elections. The de Borda Institute is at www.deborda.org
• Klein, G. (1998) Sources of Power: How people make decisions, MIT Press, Cambridge, MA, 1998. Klein Associates is at www.decisionmaking.com

Some important research journals

• Decision Support Systems
• European Journal of Operational Research
• Operations Research Letters
• Socio-Economic Planning Sciences

Mintzberg, H., Raisinghani, D., & Theoret, A. (1976). The structure of “unstructured” decision processes. Administrative Science Quarterly, 21 (6), 246-275. http://www.jstor.org/view/00018392/di995453/99p0533g/0

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Decision making".