DECISION MAKING THEORIES

THOMAS RIMAMCHATEN AND MUSA ABUBAKAR MUSA

AHMADU BELLO UNIVERSITY, ZARIA-NIGERIA

Abstract

This paper examines decision making, its features, kinds, models, theories and importance of

decision making in management, it view decision as the heart of success in every organization,

and explains times of critical moments when decision can be difficult, confusing, and nerve

racking. It further extend view on decision-making and even the various alternatives that worth

to be considered when making decision in businesses and libraries. And further concluded to

hold the view of other studies by classifying decision making into either rational or non-rational.

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Introduction

"Somewhere along the line of development we discover what we really are, and then we make

our real decision for which we are responsible. Make that decision primarily for yourself

because you can never really live anyone else's life”

….Arsham, 2010.

Decisions are at the heart of success, and at times there are critical moments when they can be

difficult, confusing, and nerve racking. A decision usually involves three steps: (1) A recognition

of a need (2) a decision to change and (3) a conscious dedication to implement the decision

(Arsham, 2010).Making the right decisions is not only what someone wants to do, but also

includes what he has to do. On one hand, the repercussions of not making a decision could be

more severe than making a wrong decision (Anwar, 2014).

Decision Making could be defined as the study of identifying and choosing from alternatives,

the best option that suits a purpose. It is usually regarded as a cognitive study as it involves

mental and logical reasoning (Ahmed, et al, 2012). It is also a course of action consciously

chosen based on some criteria from available alternatives for the purpose of desired result

(Massie, 2009).

In decision-making, there are various alternatives that worth to be considered but the interest is

not on the number of different alternatives rather to identify all the alternatives and choose the

one with the highest probability of success or that best fits specific goal or objective (Ahmed, et

al, 2012). Most decision involves a certain amount of risk. If there is no uncertainty, then there is

no decision; as you are just to act and expect a fixed result. Wherever you see a successful

business, someone once made a courageous decision. The fear of wrong decision making runs in

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heart of all good leaders and managers but the ability to make the right decision despite that fear,

makeS them successful (Ahmed, et al, 2012).

Features or Characteristics of Decision-Making:

According to Smriti (2015), the following are some of the features of decision making:

 Rational Thinking: It is invariably based on rational thinking. Since the human brain

with its ability to learn, remember and relate many complex factors, makes the rationality

possible.

 Process: It is the process followed by deliberations and reasoning.

 Selective: It is selective, i.e. it is the choice of the best course among alternatives. In

other words, decision involves selection of the best course from among the available

alternative courses that are identified by the decision-maker.

 Purposive: It is usually purposive i.e. it relates to the end. The solution to a problem

provides an effective means to the desired goal or end.

 Positive: Although every decision is usually positive sometimes certain decisions may

be negative and may just be a decision not to decide. For instance, the manufacturers of

Volkswagen car once decided not to change the model (body style) and size of the car

although the other rival enterprise (i.e. the Ford Corporation) was planning to introduce a

new model every year, in the USA.

 Commitment: Every decision is based on the concept of commitment. In other words,

the Management is committed to every decision it takes for two reasons- viz., (i) it

promotes the stability of the concern and (ii) every decision taken becomes a part of the

expectations of the people involved in the organization.

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  Evaluation: Decision-making involves evaluation in two ways: (i) the executive must

evaluate the alternatives, and (ii) he should evaluate the results of the decisions taken by

him.

Kinds of Decision Making

According to Ahmed, et al, (2012), there are various kinds of decision. They have been grouped

into three:

1. Decisions on Whether: This is a decision that involves a yes/no. An instance is the case

of a project manager contemplating on whether to get more team members or not. The

project manager can either go ahead to recruit more team members or not, there is no

middle cause to such decision and you need to decide that before other alternatives might

come up. If yes, then alternatives of how many do you need, of what specialization and

any other alternative might come up (Robert, 2009)

2. Decision on Which: This type of decision involve making a choice from two or more

alternatives, measuring the one with highest probability of success or that best fits the

conditions. An example of such decision includes an investor deciding on what brand or

product to invest in from various options. Different methods are used to make such

decision as it involves the nature of the decision maker and the nature of the decision

itself.

3. Conditional or Contingent decision: These are already made decision based on certain

conditions being met. This makes it easier for the decision maker to take action once

those conditions are met. A good instance is a team leader who said, “I have decided to

recruit more team members if we are awarded the project”.

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Models of Decision Making

Historically scientists have emphasized two basic models of decision making: the rational model

and the bounded rationality model (March, 2010).

The Rational Model

Decision making is assumed to be rational. By this we mean that a decision maker make

decisions under certainty: They know their alternatives; they know their outcomes; they know

their decision criteria; and they have the ability to make the optimum choice and then to

implement it (Towler, 2010). According to the rational model, the decision making process can

be broken down into six steps.

 Identifying the problem

 Generating alternative solutions

 Evaluating alternatives

 Choosing an alternative

 Implementing the decision

 Evaluating decision effectiveness

After a problem is identified, alternative solutions to the problem are generated. These are

carefully evaluated, and the best alternative is chosen for implementation. The implemented

alternative is then evaluated over time to assure its immediate and continued effectiveness. If

difficulties arise at any stage in the process, recycling may be effected (Fred, 2010).

Thus, we see that decision making is a logical sequence of activities. That is, before alternatives

are generated, the problem must be identified, and so on.

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The Bounded Rationality Model

The rational decision making model, discussed above, characterizes the decision maker as

completely rational. If a decision maker were completely rational, she would have perfect

information: know all alternatives, determine every consequence, and establish a complete

preference scale. Moreover, the steps in the decision-making process would consistently lead

toward selecting the alternative that maximizes the solution to each decision problem.

Frequently, decision makers are not aware that problems exist. Even when they are, they do not

systematically search for all possible alternative solutions. They are limited by time constraints,

cost, and the ability to process information. So they generate a partial list of alternative solutions

to the problem based on their experience, intuition, advice from others, and perhaps even some

creative thought. Rationality is, therefore, limited. Herbert Simon (1982, 1997, 2009) coined the

term bounded rationality to describe the decision maker who would like to make the best

decisions but normally settles for less than the optimal. In contrast to complete rationality in

decision making, bounded rationality implies the following (Simon, 1979):

1. Decisions will always be based on an incomplete and, to some degree, inadequate

comprehension of the true nature of the problem being faced.

2. Decision makers will never succeed in generating all possible alternative solutions for

consideration.

3. Alternatives are always evaluated incompletely because it is impossible to predict accurately

all consequences associated with each alternative.

4. The ultimate decision regarding which alternative to choose must be based on some criterion

other than maximization or optimization because it is impossible to ever determine which

alternative is optimal.

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Theories of Decision Making

There is no universal agreement on a standardized classification on the theories (Anwar, 2014)

According to Ahmed et al (2012), Decision theories can basically be grouped into two:

Normative and descriptive decision theory. While normative theory explains how decision

should be made, descriptive theory explains how decisions are made.

Many researchers have also classified the theories as either rational or non-rational

(Gigerenezer, 2001; Hansson, 2005; Oliveira, 2007). In differentiating the two, Gigerenezer

(2001) identified four attributes for rational theories as: Optimization, normative, omniscience

and internal consistency. In the same vein, non-rational theories are identifiable to possess

attributes such as non-optimization, descriptive, search, ecological rationality and cognitive

building blocks like emotions, imitation, and social norms (Anwar, 2014)

Some of the theories that have gained popularity in the context of decision-making are as

follows.

 Subjective Expected Utility (SEU) Theory

Savage (1954) developed the axiomatic subjective expected utility (SEU) theory in which a

decision maker chooses between alternatives (or strategies) in the presence of risk. Savage

capitalized on the assumption that the decision maker will always tend to seek pleasure and

avoid pain and as such, he will make the following computations:

i) Subjective utility that accounts on the individuals judged weightings of utility, rather than on

objective criteria.

ii) Subjective probability that accounts on the individuals estimates of likelihood, rather than on

objective statistical computations.

 Prospect Theory

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Kahneman and Tversky (1979) developed the theory of choice that accurately describes how

people actually go about making their decisions. The theory predicts that decision makers tend to

be risk averse in a domain of gains (or when there is a favorable anticipation). Similarly, the

decision maker is relatively risk seeking in a domain of losses. In other words, they established

that people aspire for uniqueness in relation to prospects being considered and will tend to shy

away from the components shared by all. They also discovered that people lean more towards the

outcomes obtained with certainty than those obtained by mere probabilities.

 Satisficing Theory

Simon (1957) advanced the concept of bounded rationality where the decision maker has limited

information, time and intellectual ability to make a decision. Instead, the decision-maker work

with limited and simplified knowledge, to reach acceptable, compromise choices (‘satisficing’),

rather than pursue ‘maximizing’ or ‘optimizing’ strategies in which one particular objective is

fully achieved (Marshall, 1998).This approach to decision making involves choosing the first

alternative that satisfies minimal standards of acceptability without exploring all possibilities

(Fred, 2010). The word “satisficing” goes contrary to the notion of optimization.

 Attribution Theory

The word “attribution” literally means the grant of responsibility and tries to explain the behavior

attributed to a person or situation. Heider (1958) advances the theory concerned with how people

perceived the behavior of themselves and other people. Heider (1958) initiated the theory, later

Weiner and colleagues (e.g., Jones et al., 1972; Weiner, 1974) developed a theoretical

framework that has become a major research paradigm of social psychology. Heider divided the

behavior attribute into internal and external factors. Internal attribution describes the behavior

within a person and factors attributes like character, attitude, aptitude and personality. In the case

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of external attribution, the situation gets assign to cause of a particular behavior e.g. the

assignment of environment or weather to causality.

Weiner (1974) advances a three-stage process that underlies an attribution. (i) The person must

perceive or observe the behavior. (ii) Then the person must believe that the behavior was

intentionally performed, and (iii) the person must determine if they believe the other person was

forced to perform the behavior (in which case the cause is attributed to the situation) or not (in

which case the cause is attributed to the other person). Weiner confined the theory on the most

important factors affecting the attribution for achievement such as ability, effort, task difficulty,

and luck.

Weiner also classified attribution along three causal dimensions: locus of control, stability, and

controllability. The locus of control further differentiates into either internal or external. The

stability dimension analyses whether there are changes over time attributed to causes. For

example, we can have ability that is stable and internal; or an effort that is unstable and internal.

Controllability is in reference to the causes one is able to control (e.g. skill/efficacy), and from

causes one cannot control (e.g. aptitude, mood, other’s actions, and luck) (Anwar,2014).

 Game theory

Is a mathematical study of strategic decision making. It is considered to be an interactive

decision theory as it takes into consideration the conflict and cooperation between intelligent

rational decision makers.

 Heuristics Theory

When decision makers make satisficing decisions, they may use a set of heuristics to guide their

decisions. A heuristic is a rule of thumb that can help the decision maker find a solution in a

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complex and uncertain situation (Moustakas, 1990). We use heuristics in our everyday lives. For

example, a heuristic rule for dealing with other people is the Golden Rule: "Do unto others as

you would have them do unto you." Football coaches use the rule, "When in doubt, punt." In

playing chess, we follow the rule of "controlling the center of the board."

The importance of decision making in Library management

Decision making and its various theories are important in the management of every organization.

Some of the importance of decision making in management are as follows:

 Better Utilization of Resources

Decision making helps to utilize the available resources for achieving the objectives of a

library, the available resources are the staff, money, materials, machines, markets and

methods.

 Facing and tackling problems and challenges

Decision making helps a library or organization to face and tackle new problems and

challenges that suddenly and inevitably arise, quick and correct decision making helps to

solve problems and accepts new challenges.

 Business Growth

Quick and correct decision making results in better utilization of resources which results

to business growth.

 Achieving objectives

Rational decision making helps the library to achieve all its objectives and meet up with

the needs of its users, because rational decisions are made after analyzing and evaluating

all alternatives.

 Facilitation of innovation

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 Rational decision making facilitates innovation, this is because it helps develop and

create new ideas, products and services in a library.

Conclusion

Decision making is a skill, and skills can be improved. The more experienced you are in making

decisions, the more you are familiar with the tools and process that lead to an effective decision

making and this will improve your confidence. Improving your decision making skills will

benefit you and your organization at large. It is therefore necessary to understand the theories

that can aid a good decision. Most achievers have been found to make a great decision in their

lives and this had led them to success and in the course of making such decision, some risks were

compromised. Risk takers tend to make better decision with good analysis. The fear of risk could

lead to not taking decision at all which is the worst decision.

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