Updated: Mar 8
Individuals think and reason before they act. It is because of this that an understanding of how
people make decisions can be helpful for explaining and predicting their behavior.
Under some recent decision situations, people follow the rational decision-making model. But for most people, and most non-routine decisions, this is probably more the exception than the rule. Few important decisions are simple or unambiguous enough for the rational model’s assumptions to apply, so we find individuals looking for solutions that satisfice rather than optimize, injecting biases and prejudices into the decision process, and relying on intuition.
Given the evidence we have described on how decisions are actually made in organizations, what can managers do to improve their decision-making? We offer five suggestions.
First, analyze the situation. Adjust your decision making style to the national culture you are
operating in and to the criteria your organization evaluates and rewards. For instance, if you are in a country that does not value rationality, do not feel compelled to follow the rational decision making model or even to try to make your decisions appear rational. Similarly, organizations differ in terms of the importance they place on risk, the use of groups, and the like. Adjust your decision style to ensure it is compatible with the organization’s culture. Second, be aware of biases. We all bring biases to the decisions we make. If you understand the biases influencing your judgment, you can begin to change the way you make decisions to reduce those biases. Third, combine rational analysis with intuition. These are not conflicting approaches to decision making. By using both, you can actually improve your decision-making effectiveness. As you gain managerial experience, you should feel increasingly confident in imposing your intuitive processes on top of your rational analysis. Fourth, do not assume that your specific decision style is appropriate for every job. Just as organizations differ, so do jobs within organizations. And your effectiveness as a decision maker will increase if you match your decision style to the requirements of the job. For instance, if your decision-making style is directive, you will be more effective working with people whose jobs require quick action. This style would match well with managing stockbrokers. An analytic style, on the other hand, would work well managing accountants, market researchers, or financial analysts.
Finally, try to enhance your creativity. Overtly look for novel solutions to problems, attempt to see problems in new ways, and use analogies. Additionally, try to remove work and organizational barriers that might impede your creativity.