Question

Discuss some of the advantages and disadvantages of the various decision-making models. Also, describe a specific example (from your own experience or a hypothetical) of a situation requiring a decision, and explain which of the models would be best to use to make a decision and why.

Answer 1

Some of the most prevalent decision-making models, including their pros and cons to see which could be the correct approach for your management style.

1.The Rational Model

Often cited as the classical approach, the rational model of decision-making is the most commonly used method, and typically consists of the following steps:

• Identification of the problem or opportunity
• Gathering and organising relevant information
• Analysing the situation
• Developing a range of options
• Evaluating and assigning a value to each option
• Selecting the option you feel is the best
• Acting decisively on that option

Advantages:

The rational model allows for an objective approach that’s based on scientifically obtained data to reach informed decisions. This reduces the chances of errors, distortions and assumptions, as well as a manager’s emotions, that might have resulted in poor judgments in the past.

This means that, due to the step-by-step methodology, decision-makers are equipped to deal with difficult problems in complex environments.

Disadvantages

The process is sometimes constrained by insufficient information, which creates problems if a manager has to consider, and then evaluate, any alternatives they need to reach a decision.

Time limitations can also be an issue. Since there’s a lot of information needed, the necessary time for observation, collection and analysis is also essential. In a fast-paced business environment where time is crucial, the rational model is somewhat limited.

It’s also an approach that tends to err on the side of caution. By limiting decision making based on what’s only available, you may not be able to take the risks necessary for success.

The Intuitive Model

Compared to the objective judgments of the rational model, the intuitive decision-making model is much less structured and opts for more subjective opinions – though it’s not simply based on gut feelings. Rather, it takes into consideration the following:

• Pattern recognition – seeing patterns in events and information, and using them to figure out a course of action
• Similarity recognition – seeing similarities in previous situations and recognising the cause and effect of a given situation.
• Salience – understanding the importance of information and the way it can affect personal judgment.

Advantages:

Compared to the rational model, intuitive decision making allows for quick decisions to be reached, while a degree of gut feeling means managers can eliminate counter-intuitive ideas in reaching their decision.

Since it takes into account the person’s emotions, it ensures that positive feelings are used to their advantage, leveraging them as a way to motivate you through the process.

As opposed to the structure of the rational model, which progresses through steps, the intuitive model opts to see everything as a bigger picture. As a result, intuition can help managers to integrate pieces of isolated data, facts and figures in order to form a cohesive vision of what needs to be done.

Disadvantages:

The intuitive model leans heavily on a person’s experience and judgment. As a result, emotions and bad or insufficient experience may end up clouding judgment and make for poor, impulsive decisions.

The Recognition Primed Model

A combination of the two above models, the primed model of decision making begins when a manager quickly assesses a situation, compares it to past situations, recognises patterns and creates a mental ‘action script’ which runs through the scenario up until its conclusion.

This then leads to two options:

• The decision-maker finds no flaw in their scenario and sets about their chosen course of action as outlined by the script they devised.
• The decision-maker encounters a problem in their action script. They then start over with a different script, repeating the process until a scenario successfully plays out.

Advantages:

Since rational and intuitive reasoning is used, it provides a degree of mental simulation from your predictions. From here, you can prevent problems should they arise because they’ve been played out mentally beforehand.

Disadvantages:

Inexperienced managers may opt for this model when one of the other two models would be more appropriate in certain situations, such as for non-critical decisions.

The trial-and-error approach makes it relatively time-consuming. If time is of the essence, a manager may pick the first course of action, which may be unsatisfactory.

Case study based on Rational Model (Best to use)

Southwest Airlines Co. ("Southwest") is a major domestic airline that provides primarily short haul, high‐frequency, point‐to‐point, low‐fare service. Founded in 1971 and headquartered in the US, Southwest is a large low‐cost airline. Airlines rely on key inputs such as aircraft, fuel and labour in order to operate.  Like any airline it is sensitive to jet fuel prices and other operating costs. FORTUNE has listed Southwest Airlines among America’s Top Ten most admired corporations and previously ranked Southwest Airlines in the top five of the “Best Companies to Work For” in America. Today Southwest operates over 500 Boeing 737 aircraft in 66 cities. Southwest has among the lowest cost structures in the domestic airline industry and consistently offers the lowest and simplest fares. Southwest also has one of the best overall Customer Service records. The company is committed to provide its employees with a stable work environment with equal opportunity for learning and personal growth; there are more than 35,000 employees throughout the Southwest system. The airline is unionized (heavily unionized when compared with other US airlines). In 1995, Southwest became one of the first airlines to have a web site. In 2006, 70 percent of flight bookings and 73 percent of revenue was generated from bookings on southwest.com.