Human Resource Knowledge

The Rational Model of decisions making

In this article let us begin by describing, at least in theory, how individuals should behave in order to maximize or optimize a certain outcome. We call this the rational decision making process.

The Rational Decisions making process:

We often think that the best decision maker is rational. That is, he or she makes consistent, value maximizing choices within specified constraints. These choices are made following a six step rational decision making model. Moreover, specific assumptions underlie this model.

The six steps in the rational decision making model are listed below. The model begins by defining problem. As noted previously, a problem exists when there is a discrepancy between an existing and a desired state of affairs. If you calculate your monthly expenses and find you’re spending $100 more than you allocated in your budget, you have defined a problem. Many poor decisions can be traced to the decision maker overlooking a problem or defining the wrong problem.

Steps in the rational Decision making Model

1. Define the problem
2. Identify the decision criteria
3. Allocate weights to the criteria
4. Develop the alternatives.
5. Evaluate the alternatives
6. Select the best alternatives

Once a decision maker has defined the problem, he or she needs to identify the decision criteria that will be important in solving the problem. In this step, the decision maker determines what is relevant in making the decision. This step rings the decision maker’s interests, values and similar personal preferences into the process. Identifying criteria is important because what one person thinks is relevant, another person may not. Also keep in mind that any factors not identified in this step are considered irrelevant to the decision maker.

The criteria identified are rarely all equal in importance. So, the third step requires the decision maker to weight the previously identified criteria in order to give them the correct priority in the decision.

The fourth step requires the decision maker to generate possible alternatives that could succeed in resolving the problem. No attempt is made in this step to appraise these alternatives only to list them.

Once the alternatives have been generated, the decision maker must critically analyze and evaluate each one. This is done by rating alternative on each criterion. The strengths and weaknesses of each alternative become evident as they are compared with the criteria and weights established in the second and third steps.

The final step in this model requires computing the optimal decision. This is done by evaluating each alternative against the weighted criteria and selecting the alternative with higher total score.

Assumptions of the Model: The rational decision-making we just described contains a number of assumptions. Let’s briefly outline those assumptions:

1. Problem clarity. The problem is clear and unambiguous. The decision maker is assumed to have complete information regarding the decision situation.
2. Known options; It is assumed the decision maker can identify all the relevant criteria and can list all the viable alternatives. Furthermore, the decision maker and can list all the viable alternatives. Furthermore, the decision maker is aware of all the possible consequences of each alternative.
3. Clear preference: Rationality assumes that the criteria and alternatives can be raked and weighted to reflect their importance.
4. Constant preferences: It’s assumed that the specific decision criteria are constant and that the weights assigned to them stable over time.
5. No time or cost constraints: the rational decision maker can obtain full information about criteria and alternatives because it’s assumed that there are on time or cost constraints.
6. Maximum payoff: The rational decision maker will choose the alternative that yields the highest perceived value.

Labels: Management

posted by Paresh @ 1:29 PM