Decision Making - Meaning and

Important Concepts
Every organization needs to make decisions at one point or other as part of managerial process.
Decisions are made in the best interest of the organization. For that matter, decisions made by the
organization are to lighten the way forward. Be it strategic, business activities or HR matters, processes of
making decisions is complex, involves professionals of different genre. While small organization involves
all levels of managers, complex organizations largely depend on a team of professionals specially trained
to make all sorts of decisions. But remember, such a body alone cannot come out with final decisions.
Here, the point is, decision making process is cumulative and consultative process. The process, on the
whole, bears its pros and cons and would by and large emanate results and consequences in the
organizations’ overall growth and prospects.

Decisions are taken to support organizational growth. The whole fabric of management, i.e. its day
to day operation is rightly built on managerial decisions. Top notch companies, as evidenced by their
functions, effective communication tools are utilized in addition to normal consultation process to make
decisions that would have large scale implications on the company’s prospects.

Discussions and consultations are two main tools that support and eventually bring out decisions. For
instance to take a decision on how to embark on new business activity suggested by strategic
management team must have developed through series of consultative process, which is now available
with implementation team. Here we see the cumulative effect of decision taken at one point by a different
body of affairs. Decision taken by strategic managers is to push new and innovative business line or
initiative. At this point the decision taken by such team becomes consultative point for discussion for
implementation professionals. There is lot to debate, research and finalize. Is the new proposal viable ? Is
it innovative enough ? Can there be growth stimulant in the strategies proposed ? Handle-ful of such
questions evolved from the decision taken by strategic group has reflective influence on the next level of
managerial consultations and meetings. Let us accept, at this point of discussion, that proposals
submitted by business development team would largely depend on another set of deliberations in the
board room.

Thus, the final decision to roll out a product or service is through cumulative interim decisions taken by
various internal and external parties. And also the final decision is reflective and founded on researches
and consultations. Whole process is a chain affair where one decision taken at one point and at one level
shall have far reaching implications in the way an organization moves forward.

As a matter of fact, capable of taking critical decisions is one of the many attributes that every manager
should have, be it top level or middle or entry level. By nature a human being during his existence and by
virtue of his instinct makes decisions for his survival, as social psychologists put it. By and large,
managers are polished individuals to take decisions to affect others, ie the organization’s existence and
growth thus is annotative with human endeavor to live and succeed. Success succeeds on the decisions
taken, be it by an individual or an organization.

What is Decision Making ?

Decision-making is an integral part of modern management. Essentially, Rational or sound decision
making is taken as primary function of management. Every manager takes hundreds and hundreds of
decisions subconsciously or consciously making it as the key component in the role of a manager.
Decisions play important roles as they determine both organizational and managerial activities. A decision
can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational
or managerial objectives or goals. Decision making process is continuous and indispensable component
of managing any organization or business activities. Decisions are made to sustain the activities of all
business activities and organizational functioning.

Decisions are made at every level of management to ensure organizational or business goals are
achieved. Further, the decisions make up one of core functional values that every organization adopts
and implements to ensure optimum growth and drivability in terms of services and or products offered.

As such, decision making process can be further exemplified in the backdrop of the following definitions.

Definition of Decision Making

According to the Oxford Advanced Learner’s Dictionary the term decision making means - the process of
deciding about something important, especially in a group of people or in an organization.

Trewatha & Newport defines decision making process as follows:, “Decision-making involves the
selection of a course of action from among two or more possible alternatives in order to arrive at
a solution for a given problem”.

As evidenced by the foregone definitions, decision making process is a consultative affair done by a
comity of professionals to drive better functioning of any organization. Thereby, it is a continuous and
dynamic activity that pervades all other activities pertaining to the organization. Since it is an ongoing
activity, decision making process plays vital importance in the functioning of an organization. Since
intellectual minds are involved in the process of decision making, it requires solid scientific knowledge
coupled with skills and experience in addition to mental maturity.

Further, decision making process can be regarded as check and balance system that keeps the
organisation growing both in vertical and linear directions. It means that decision making process
seeks a goal. The goals are pre-set business objectives, company missions and its vision. To achieve
these goals, company may face lot of obstacles in administrative, operational, marketing wings and
operational domains. Such problems are sorted out through comprehensive decision making process. No
decision comes as end in itself, since in may evolve new problems to solve. When one problem is solved
another arises and so on, such that decision making process, as said earlier, is a continuous and
dynamic.

A lot of time is consumed while decisions are taken. In a management setting, decision cannot be taken
abruptly. It should follow the steps such as

1. Defining the problem

2. Gathering information and collecting data
3. Developing and weighing the options
4. Choosing best possible option
5. Plan and execute
6. Take follow up action

Since decision making process follows the above sequential steps, a lot of time is spent in this
process. This is the case with every decision taken to solve management and administrative
problems in a business setting. Though the whole pro
Decision Making: How much does
Hierarchy Matter ?
In the contemporary business world, many companies have layers and layers of hierarchy where
decisions are made at the top and passed down to the rank and file employees. This gives rise to
organizational structures that are vertically deep and horizontally broad with spans of control extending to
several layers in both ways. It is a moot point as to whether decisions made at the top are actualized fully
considering the several layers that they have to pass by the time they reach the bottom. Of course, this
depends on the kind of organization since bureaucratic structures often have tendencies of the decisions
being not implemented due to vested interests and the inertia. The latter is especially important as many
bureaucracies desist from implementing decisions because of lethargy owing to the nature of the
organizational setup.

In practice, many organizations ensure that certain autonomy is given to the employees in the
middle layers as well as those slightly senior so that decision making need not be centralized.
This helps the organizations to democratize the decision making process wherein the autonomy enjoyed
by the middle managers and the rank and file employees ensures their wholehearted participation in the
implementation of the decisions.

Indeed, this often leads to situations where decisions are taken at the level of the middle and lower
management concerning the day to day running of their teams which means that broad level decision
making concerning organizational policies and strategies are done at the top.

The concept of profit centres or cost centres is especially useful to consider in cases where decision
making is decentralized. For example, companies like Citigroup have divided their operations into regions
and divisions according to functional areas where decisions made at each region level are taken on the
basis of the profit earned by them relative to the costs incurred in running them. Since the regional heads
and the heads of the divisions are responsible for the profits made or losses incurred, they take the
decisions in a manner that benefits their regions or divisions. Indeed, this is a very effective way of
ensuring that the right decisions are taken which not only benefit the region or the division but the entire
organization as well.

In recent years, there has emerged the process of having divisional heads run their divisions like
companies wherein they are responsible for all the activities of their divisions and only the decisions
pertaining to very high level strategies are made from the headquarters. This is the case with large and
mega corporations like Unilever and Proctor & Gamble where decisions are taken at the top that pertain
to broad directions that the companies want to follow and most decision making is decentralized. This
goes down the line as well with each country, state and group level centres taking decisions that affect
their day to day affairs in accordance with their local conditions.

The point here is that decision making must benefit the rank and file employees as well as the top
management and hence unidirectional decision making does not bode well for the organization. In
conclusion, decision making has to be according to the needs of the situation and must balance the
competing interests for the same resource and must be based on taking everyone on board. Only then
would the decisions be truly democratic.

Top Down Decision Making versus

Bottom Up Decision Making
The previous articles touched upon the role of hierarchy in decision making. In this article, we consider
whether top down decision or bottom up decision making is effective. To consider this comparison it
would be useful to think of top down decision making as being akin to someone sitting on top of a tree
telling those at the bottom about how best to take care of the garden on the ground. On the other hand,
bottom up decision making is akin to those at the bottom deciding on how best to tend the garden and
ensuring that the other trees grow to the same height as well. It does not take a genius to figure out that
those at the bottom have a better understanding of the ground realities than those at the top. The point
here is that top down decision making is becoming redundant in these days when autonomy and
decentralization are the norm.

Having said that, it is important to realize that not all decisions can be made by those at the middle
or lower levels of the corporate hierarchy; Indeed, it is the case that most decision making
pertaining to organizational policies, firm wise strategy and customer acquisition and customer
relationship management has to be done from the top since the view from the top is unhindered
as well as the top management having the experience and the foresight to take such decisions.

The point that needs to be noted is that bottom up decision making works well when the day to day
running of the teams and divisions are concerned. It does not work well in cases of strategic acquisitions
and firm wide policy making that is best left to the top management.

Of course, which is better also depends on the type of organization since those in the services sector
operate in more democratic ways as compared to the firms in the manufacturing sector. This is because
of the very nature of the work which is different in these two cases. Since manufacturing is all about set
routines and machines, the instructions have to be sent from the top since the decision making as well as
the implementation operates in linear ways. However, the services sector is driven by complexity and
non-linearity and hence, decision making has to be done according to the needs of the situation and the
players involved in the decision making process have to act in ways that maximize their benefits from the
decision.

Finally, this is the bottom line requirement for any decision making process i.e. how much benefit that the
decision brings to the firm as opposed to the costs incurred in such decision making. If the benefits far
outweigh the costs, then decisions can be done in top down or bottom up manner with outcomes that are
favourable to the whole organization. There are many instances of decisions taken at the top that were
not actualized and implemented properly because of incoherent communication and inconsistent
transmission. On the other hand, there are many decisions that have been taken by the middle and lower
levels that lack the experience and foresight not to mention the strategic depth which have resulted in
short term thinking.

In conclusion, top down or bottom up decision making is effective according to the needs of the situation
and is determined by several factors which we would examine one by one in the succeeding articles.

Decision Making Problem

2

Is it a Decision or is it a Problem?
One of the first decision making problems you face (often without realising it) is to decide
whether you have a problem to solve or a decision to make. Time can be wasted and people
frustrated if you resort to setting up a problem solving team when really a decision needed to
be made.

Alternatively living with a decision that was made, when it wasn’t clear why something had gone
wrong (that is, you had a problem to solve first before you could make a decision) can be just as
costly.
Decision making problems often arise because you aren’t clear whether you have a problem to solve
or a decision to make!

We’ll return to this later. First though, what are some of the decision making problems we face?

Why Do We Get So Many Decisions Wrong?

Not only do we sometimes get mixed up between decisions or problems, according to Ohio State
University management professor, Paul C. Nutt, we only get about 50% of our decisions in the
workplace right! Half the time they are wrong, so there is evidence that we certainly do have decision
making problems.

Paul C. Nutt’s research illustrates that bad decisions were usually bad because two things were
missing:

1. adequate participation of stakeholders in the decision making process;

2. sufficient time spent generating a range of possible solutions.

Too often those who should have been involved weren’t, and solutions were proposed and acted
upon too quickly. Often with disastrous effects!

A third reason that emerged from his research is that: “too often, managers make bad tactical
selections ….. because they believe that following recommended decision-making practices
would take too much time and demand excessive cash outlays.”

There seems to be three good reasons why we might have decision making problems:

1. We don’t involve the key people who should be involved

2. We don’t generate enough alternatives upon which to base our choice of decision

3. We don’t follow recognised and proven decision making processes

Decision Making Problem: is it a Decision or is it a Problem?

As we suggested earlier, sometimes what is required is a
decision rather than to solve a problem. But how do you decide
whether you need to make a decision or solve a problem?
Solving a problem, although having many similarities with decision making, tends to have at least
one significant difference. A definition of problem solving tends to suggest that a problem has its
roots in the past, whereas decisions are more about the future.

A problem is usually where something gone wrong ( or there is a gap or difficulty) where the cause
can be traced to the past. A decision looks ahead. It is a commitment to a course of action which is
uncertain. Decision making of course is a part of any problem solving process, you need to decide
what action to take having analysed a problem and generated a range of options. But here’s the
essence of the decision making problem: how do you know whether you have a decision to make or
a problem to solve?

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A simple approach is to determine whether there is something wrong, or something you are
dissatisfied with you know needs to change. If there is, and you know why something is wrong and
there are clear approaches to take, then you have a decision to make, you look forward and act. It is
only when you have a situation where it is not clear what should be done, that you then have a
problem to solve.

As a final thought whilst being clear whether you have a decision to make or a problem to solve is
crucial, perhaps even more fundamental is to ask yourselfdecision making lesson number 1 do you
really need to make a decision?

If you are interested in finding out more about Professor Nutt’s approach to decision making follow
this link to read what he has to say in particular in chapter 1 page 4, where he discusses Drucker’s
and Weick’s calls to decide whether there is a decision to make.

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Decision-making

This article deals with decision-ma king as

analyzed in psychology. See also Decision theory.

Sample flowchart representing the decision process to add a new article to Wikipedia.
In psychology, decision-making is regarded as the cognitive process resulting in the selection
of a belief or a course of action among several alternative possibilities. Every decision-
making process produces a final choice that may or may not prompt action. Decision-making
is the process of identifying and choosing alternatives based on the values and preferences
of the decision-maker. Overview[edit]

Decision-making can be regarded as a problem-solving activity terminated by a solution deemed to

be satisfactory. It is therefore a process which can be more or less rational orirrational and can be
based on explicit knowledge or tacit knowledge.

Human performance with regard to decisions has been the subject of active research from several
perspectives:

 Psychological: examining individual decisions in the context of a set of needs, preferences and
values the individual has or seeks.
 Cognitive: the decision-making process regarded as a continuous process integrated in the
interaction with the environment.
 Normative: the analysis of individual decisions concerned with the logic of decision-making,
or communicative rationality, and the invariant choice it leads to.[1]

A major part of decision-making involves the analysis of a finite set of alternatives described in terms
of evaluative criteria. Then the task might be to rank these alternatives in terms of how attractive
they are to the decision-maker(s) when all the criteria are considered simultaneously. Another task
might be to find the best alternative or to determine the relative total priority of each alternative (for
instance, if alternatives represent projects competing for funds) when all the criteria are considered
simultaneously. Solving such problems is the focus of multiple-criteria decision analysis (MCDA).
This area of decision-making, although very old, has attracted the interest of many researchers and
practitioners and is still highly debated as there are many MCDA methods which may yield very
different results when they are applied on exactly the same data.[2] This leads to the formulation of
a decision-making paradox.

Logical decision-making is an important part of all science-based professions, where specialists

apply their knowledge in a given area to make informed decisions. For example, medical decision-
making often involves a diagnosis and the selection of appropriate treatment. But naturalistic
decision-making research shows that in situations with higher time pressure, higher stakes, or
increased ambiguities, experts may use intuitive decision-making rather than structured approaches.
They may follow a recognition primed decisionthat fits their experience and arrive at a course of
action without weighing alternatives.[citation needed]

The decision-maker's environment can play a part in the decision-making process. For example,
environmental complexity is a factor that influences cognitive function.[3] A complex environment is
an environment with a large number of different possible states which come and go over
time.[4] Studies done at the University of Colorado have shown that more complex environments
correlate with higher cognitive function, which means that a decision can be influenced by the
location. One experiment measured complexity in a room by the number of small objects and
appliances present; a simple room had less of those things. Cognitive function was greatly affected
by the higher measure of environmental complexity making it easier to think about the situation and
make a better decision.[3]

Research about decision-making is also published under the label problem solving, in particular in
European psychological research.[5]

Problem analysis[edit]

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It is important to differentiate between problem analysis and decision-making. Traditionally, it is

argued that problem analysis must be done first, so that the information gathered in that process
may be used towards decision-making.[6][page needed]

Characteristics of problem analysis

 Analyze performance, what should the results be against what they actually are
 Problems are merely deviations from performance standards
 Problems must be precisely identified and described
 Problems are caused by a change from a distinctive feature
 Something can always be used to distinguish between what has and hasn't been affected by a
cause
 Causes of problems can be deduced from relevant changes found in analyzing the problem
 Most likely cause of a problem is the one that exactly explains all the facts
Characteristics of decision-making

 Objectives must first be established

 Objectives must be classified and placed in order of importance
 Alternative actions must be developed
 The alternatives must be evaluated against all the objectives
 The alternative that is able to achieve all the objectives is the tentative decision
 The tentative decision is evaluated for more possible consequences
 The decisive actions are taken, and additional actions are taken to prevent any adverse
consequences from becoming problems and starting both systems (problem analysis and
decision-making) all over again
 There are steps that are generally followed that result in a decision model that can be used to
determine an optimal production plan[7]
 In a situation featuring conflict, role-playing may be helpful for predicting decisions to be made
by involved parties[8]
Analysis paralysis[edit]
Main article: Analysis paralysis

Analysis paralysis is the state of over-analyzing (or over-thinking) a situation so that a decision or
action is never taken, in effect paralyzing the outcome.

Information overload[edit]
Main article: Information overload

Information overload is "a gap between the volume of information and the tools we have to
assimilate" it.[9] Excessive information affects problem processing and tasking, which affects
decision-making.[10] Crystal C. Hall and colleagues described an "illusion of knowledge", which
means that as individuals encounter too much knowledge it can interfere with their ability to make
rational decisions.[11]

Post-decision analysis[edit]
Evaluation and analysis of past decisions is complementary to decision-making. See also Mental
accounting and Postmortem documentation.

Everyday techniques[edit]

Decision-making techniques can be separated into two broad categories: group decision-
making techniques and individual decision-making techniques. Individual decision-making
techniques can also often be applied by a group.

Group[edit]

 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.
 Voting-based methods:
 Majority requires support from more than 50% of the members of the group. Thus, the bar
for action is lower than with consensus.
  Plurality, where the largest block in a group decides, even if it falls short of a majority.
 Range voting lets each member score one or more of the available options. The option with
the highest average is chosen. This method has experimentally been shown to produce the
lowest Bayesian regret among common voting methods, even when voters are strategic.[citation
needed]

 Delphi method is structured communication technique for groups, originally developed for
collaborative forecasting but has also been used for policy making.
 Dotmocracy is a facilitation method that relies on the use of special forms called Dotmocracy
Sheets to allow large groups to collectively brainstorm and recognize agreement on an unlimited
number of ideas they have authored.
 Participative decision-making occurs when an authority opens up the decision-making process
to a group of people for a collaborative effort.
 Decision engineering uses a visual map of the decision-making process based on system
dynamics and can be automated through a decision modeling tool, integrating big data, machine
learning, and expert knowledge as appropriate.
Individual[edit]

 Decisional balance sheet: listing the advantages and disadvantages (benefits and costs, pros
and cons) of each option, as suggested by Plato's Protagoras and by Benjamin Franklin.[12]
 Simple prioritization: choosing the alternative with the highest probability-weighted utility. This
may involve considering the opportunity cost of different alternatives. See alsoDecision analysis.
 Satisficing: examining alternatives only until the first acceptable one is found. The opposite
is maximizing, in which many or all alternatives are examined in order to find the best option.
 Acquiesce to a person in authority or an "expert"; "just following orders".
 Anti-authoritarianism: taking the most opposite action compared to the advice of mistrusted
authorities.
 Flipism e.g. flipping a coin, cutting a deck of playing cards, and other random or coincidence
methods – or prayer, tarot cards, astrology, augurs, revelation, or other forms ofdivination,
superstition or pseudoscience.
 Automated decision support: setting up criteria for automated decisions.
 Decision support systems: using decision-making software when faced with highly complex
decisions or when considering many stakeholders, categories, or other factors that affect
decisions.

Steps[edit]
GOFER[edit]
In the 1980s, psychologist Leon Mann and colleagues developed a decision-making process called
GOFER, which they taught to adolescents, as summarized in the bookTeaching Decision Making To
Adolescents.[13] The process was based on extensive earlier research conducted with
psychologist Irving Janis.[14] GOFER is an acronym for five decision-making steps:

1. Goals: Survey values and objectives.

2. Options: Consider a wide range of alternative actions.
3. Facts: Search for information.
4. Effects: Weigh the positive and negative consequences of the options.
5. Review: Plan how to implement the options.
DECIDE[edit]
Main article: DECIDE

In 2008, Kristina Guo published the DECIDE model of decision-making, which has six parts:[15]

1. Define the problem

2. Establish or Enumerate all the criteria (constraints)
3. Consider or Collect all the alternatives
4. Identify the best alternative
5. Develop and implement a plan of action
6. Evaluate and monitor the solution and examine feedback when necessary
Other
In 2007, Pam Brown of Singleton Hospital in Swansea, Wales, divided the decision-making process
into seven steps:[16]

1. Outline your goal and outcome.

2. Gather data.
3. Develop alternatives (i.e., brainstorming).
4. List pros and cons of each alternative.
5. Make the decision.
6. Immediately take action to implement it.
7. Learn from and reflect on the decision.

In 2009, professor John Pijanowski described how the Arkansas Program, an ethics curriculum at
the University of Arkansas, used eight stages of moral decision-making based on the work of James
Rest:[17]:6
 1. Establishing community: Create and nurture the relationships, norms, and procedures that
will influence how problems are understood and communicated. This stage takes place prior
to and during a moral dilemma.
2. Perception: Recognize that a problem exists.
3. Interpretation: Identify competing explanations for the problem, and evaluate the drivers
behind those interpretations.
4. Judgment: Sift through various possible actions or responses and determine which is more
justifiable.
5. Motivation: Examine the competing commitments which may distract from a more moral
course of action and then prioritize and commit to moral values over other personal,
institutional or social values.
6. Action: Follow through with action that supports the more justified decision.
7. Reflection in action.
8. Reflection on action.
Group stages[edit]
According to B. Aubrey Fisher, there are four stages or phases that should be involved in all group
decision-making:[18]

 Orientation. Members meet for the first time and start to get to know each other.
 Conflict. Once group members become familiar with each other, disputes, little fights and
arguments occur. Group members eventually work it out.
 Emergence. The group begins to clear up vague opinions by talking about them.
 Reinforcement. Members finally make a decision and provide justification for it.

It is said that establishing critical norms in a group improves the quality of decisions, while the
majority of opinions (called consensus norms) do not.[19]

Rational and irrational[edit]

In economics, it is thought that if humans are rational and free to make their own decisions, then
they would behave according to rational choice theory.[20]:368–370 Rational choice theory says that a
person consistently makes choices that lead to the best situation for himself or herself, taking into
account all available considerations including costs and benefits; the rationality of these
considerations is from the point of view of the person himself, so a decision is not irrational just
because someone else finds it questionable.

In reality, however, there are some factors that affect decision-making abilities and cause people to
make irrational decisions – for example, to make contradictory choices when faced with the same
problem framed in two different ways (see also Allais paradox).
Cognitive and personal biases[edit]

Biases usually creep into decision-making processes. Here is a list of commonly debated biases in
judgment and decision-making:

 Selective search for evidence (also known as confirmation bias): People tend to be willing to
gather facts that support certain conclusions but disregard other facts that support different
conclusions. Individuals who are highly defensive in this manner show significantly greater left
prefrontal cortex activity as measured by EEG than do less defensive individuals.[21]
 Premature termination of search for evidence: People tend to accept the first alternative that
looks like it might work.
 Cognitive inertia is unwillingness to change existing thought patterns in the face of new
circumstances.
 Selective perception: People actively screen out information that they do not think is important
(see also Prejudice). In one demonstration of this effect, discounting of arguments with which
one disagrees (by judging them as untrue or irrelevant) was decreased by selective activation of
right prefrontal cortex.[22]
 Wishful thinking is a tendency to want to see things in a certain – usually positive – light, which
can distort perception and thinking.[23]
 Choice-supportive bias occurs when people distort their memories of chosen and rejected
options to make the chosen options seem more attractive.
 Recency: People tend to place more attention on more recent information and either ignore or
forget more distant information (see Semantic priming). The opposite effect in the first set of data
or other information is termed primacy effect.[24][page needed]
 Repetition bias is a willingness to believe what one has been told most often and by the greatest
number of different sources.
 Anchoring and adjustment: Decisions are unduly influenced by initial information that shapes our
view of subsequent information.
 Groupthink is peer pressure to conform to the opinions held by the group.
 Source credibility bias is a tendency to reject a person's statement on the basis of a bias against
the person, organization, or group to which the person belongs. People preferentially accept
statement by others that they like (see also Prejudice).
 Incremental decision-making and escalating commitment: People 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).
 Attribution asymmetry: People tend to attribute their own success to internal factors, including
abilities and talents, but explain their failures in terms of external factors such as bad luck. The
reverse bias is shown when people explain others' success or failure.
 Role fulfillment is a tendency to conform to others' decision-making expectations.
 Underestimating uncertainty and the illusion of control: People tend to underestimate future
uncertainty because of a tendency to believe they have more control over events than they
really do.
 Framing bias: This is best avoided by increasing numeracy and presenting data in several
formats (for example, using both absolute and relative scales).[25]
 Sunk-cost fallacy is a specific type of framing effect that affects decision-making. It involves
an individual making a decision about a current situation based on what they have
previously invested in the situation.[20]:372 An example of this would be an individual that is
refraining from dropping a class that that they are most likely to fail, due to the fact that they
feel as though they have done so much work in the course thus far.
 Prospect theory involves the idea that when faced with a decision-making event, an individual is
more likely to take on a risk when evaluating potential losses, and are more likely to avoid risks
when evaluating potential gains. This can influence one's decision-making depending if the
situation entails a threat, or opportunity.[20]:373
 Optimism bias is a tendency to overestimate the likelihood of positive events occurring in the
future and underestimate the likelihood of negative life events.[26] Such biased expectations are
generated and maintained in the face of counter evidence through a tendency to discount
undesirable information.[27] An optimism bias can alter risk perception and decision-making in
many domains, ranging from finance to health.
 Reference class forecasting was developed to eliminate or reduce cognitive biases in decision-
making.

Cognitive styles[edit]
Optimizing vs. satisficing[edit]
Main article: Maximization (psychology)

Herbert A. Simon coined the phrase "bounded rationality" to express the idea that human decision-
making is limited by available information, available time and the mind's information-processing
ability. Further psychological research has identified individual differences between two cognitive
styles: maximizers try to make an optimal decision, whereas satisficers simply try to find a solution
that is "good enough". Maximizers tend to take longer making decisions due to the need to maximize
performance across all variables and make tradeoffs carefully; they also tend to more often regret
their decisions (perhaps because they are more able than satisficers to recognise that a decision
turned out to be sub-optimal).[28]

Intuitive vs. rational[edit]

Main article: Dual process theory
The psychologist Daniel Kahneman, adopting terms originally proposed by the psychologists Keith
Stanovich and Richard West, has theorized that a person's decision-making is the result of an
interplay between two kinds of cognitive processes: an automatic intuitive system (called "System 1")
and an effortful rational system (called "System 2"). System 1 is a bottom-up, fast, and implicit
system of decision-making, while system 2 is a top-down, slow, and explicit system of decision-
making.[29] System 1 includes simple heuristics in judgment and decision-making such as the affect
heuristic, the availability heuristic, the familiarity heuristic, and the representativeness heuristic.

Combinatorial vs. positional[edit]

Styles and methods of decision-making were elaborated by Aron Katsenelinboigen, the founder
of predispositioning theory. In his analysis on styles and methods, Katsenelinboigen referred to the
game of chess, saying that "chess does disclose various methods of operation, notably the creation
of predisposition-methods which may be applicable to other, more complex systems."[30]:5

Katsenelinboigen states that apart from the methods (reactive and selective) and sub-methods
(randomization, predispositioning, programming), there are two major styles: positional and
combinational. Both styles are utilized in the game of chess. According to Katsenelinboigen, the two
styles reflect two basic approaches to uncertainty: deterministic (combinational style) and
indeterministic (positional style). Katsenelinboigen's definition of the two styles are the following.

The combinational style is characterized by:

 a very narrow, clearly defined, primarily material goal; and

 a program that links the initial position with the final outcome.

In defining the combinational style in chess, Katsenelinboigen wrote: "The combinational style
features a clearly formulated limited objective, namely the capture of material (the main constituent
element of a chess position). The objective is implemented via a well-defined, and in some cases,
unique sequence of moves aimed at reaching the set goal. As a rule, this sequence leaves no
options for the opponent. Finding a combinational objective allows the player to focus all his
energies on efficient execution, that is, the player's analysis may be limited to the pieces directly
partaking in the combination. This approach is the crux of the combination and the combinational
style of play.[30]:57

The positional style is distinguished by:

 a positional goal; and

 a formation of semi-complete linkages between the initial step and final outcome.

"Unlike the combinational player, the positional player is occupied, first and foremost, with the
elaboration of the position that will allow him to develop in the unknown future. In playing the
positional style, the player must evaluate relational and material parameters as independent
variables. ... The positional style gives the player the opportunity to develop a position until it
becomes pregnant with a combination. However, the combination is not the final goal of the
positional player – it helps him to achieve the desirable, keeping in mind a predisposition for the
future development. The pyrrhic victory is the best example of one's inability to think positionally."[31]

The positional style serves to:

 create a predisposition to the future development of the position;

 induce the environment in a certain way;
 absorb an unexpected outcome in one's favor; and
 avoid the negative aspects of unexpected outcomes.
Influence of Myers-Briggs type[edit]
According to Isabel Briggs Myers, a person's decision-making process depends to a significant
degree on their cognitive style.[32][page needed] Myers developed a set of four bi-polar dimensions, called
the Myers-Briggs Type Indicator (MBTI). The terminal points on these dimensions
are: thinking and feeling; extroversion and introversion; judgment andperception;
and sensing and intuition. She claimed that a person's decision-making style correlates well with
how they score on these four dimensions. For example, someone who scored near the thinking,
extroversion, sensing, and judgment ends of the dimensions would tend to have a logical, analytical,
objective, critical, and empirical decision-making style. However, some psychologists say that the
MBTI lacks reliability and validity and is poorly constructed.[33][34]

Other studies suggest that these national or cross-cultural differences in decision-making exist
across entire societies. For example, Maris Martinsons has found that American, Japanese and
Chinese business leaders each exhibit a distinctive national style of decision-making.[35]

Neuroscience[edit]

Decision-making is a region of intense study in the fields of systems neuroscience, and cognitive
neuroscience. Several brain structures, including the anterior cingulate cortex(ACC), orbitofrontal
cortex and the overlapping ventromedial prefrontal cortex are believed to be involved in decision-
making processes. A neuroimaging study[36] found distinctive patterns of neural activation in these
regions depending on whether decisions were made on the basis of perceived personal volition or
following directions from someone else. Patients with damage to the ventromedial prefrontal
cortex have difficulty making advantageous decisions.[37][page needed]

A common laboratory paradigm for studying neural decision-making is the two-alternative forced
choice task (2AFC), in which a subject has to choose between two alternatives within a certain time.
A study of a two-alternative forced choice task involving rhesus monkeys found that neurons in
the parietal cortex not only represent the formation of a decision[38] but also signal the degree of
certainty (or "confidence") associated with the decision.[39] Another recent study found that lesions to
the ACC in the macaque resulted in impaired decision-making in the long run of reinforcement
guided tasks suggesting that the ACC may be involved in evaluating past reinforcement information
and guiding future action.[40] A 2012 study found that rats and humans can optimally accumulate
incoming sensory evidence, to make statistically optimal decisions.[41]

Emotion appears able to aid the decision-making process. Decision-making often occurs in the face
of uncertainty about whether one's choices will lead to benefit or harm (see also Risk). The somatic-
marker hypothesis is a neurobiological theory of how decisions are made in the face of uncertain
outcome. This theory holds that such decisions are aided by emotions, in the form of bodily states,
that are elicited during the deliberation of future consequences and that mark different options for
behavior as being advantageous or disadvantageous. This process involves an interplay between
neural systems that elicit emotional/bodily states and neural systems that map these
emotional/bodily states.[42] A recent lesion mapping study of 152 patients with focal brain lesions
conducted by Aron K. Barbey and colleagues provided evidence to help discover the neural
mechanisms of emotional intelligence.[43][44][45]

Although it is unclear whether the studies generalize to all processing, subconscious processes have
been implicated in the initiation of conscious volitional movements. See theNeuroscience of free will.

In adolescents vs. adults[edit]

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During their adolescent years, teens are known for their high-risk behaviors and rash decisions.
Recent research[citation needed] has shown that there are differences in cognitive processes between
adolescents and adults during decision-making. Researchers have concluded that differences in
decision-making are not due to a lack of logic or reasoning, but more due to the immaturity
of psychosocial capacities that influence decision-making. Examples of their undeveloped capacities
which influence decision-making would be impulse control, emotion regulation, delayed
gratification and resistance to peer pressure. In the past, researchers have thought that adolescent
behavior was simply due to incompetency regarding decision-making. Currently, researchers have
concluded that adults and adolescents are both competent decision-makers, not just adults.
However, adolescents' competent decision-making skills decrease when psychosocial capacities
become present.
Recent research[citation needed] has shown that risk-taking behaviors in adolescents may be the product of
interactions between the socioemotional brain network and its cognitive-control network. The
socioemotional part of the brain processes social and emotional stimuli and has been shown to be
important in reward processing. The cognitive-control network assists in planning and self-regulation.
Both of these sections of the brain change over the course of puberty. However, the socioemotional
network changes quickly and abruptly, while the cognitive-control network changes more gradually.
Because of this difference in change, the cognitive-control network, which usually regulates the
socioemotional network, struggles to control the socioemotional network when psychosocial
capacities are present.[clarification needed]

When adolescents are exposed to social and emotional stimuli, their socioemotional network is
activated as well as areas of the brain involved in reward processing. Because teens often gain a
sense of reward from risk-taking behaviors, their repetition becomes ever more probable due to the
reward experienced. In this, the process mirrors addiction. Teens can become addicted to risky
behavior because they are in a high state of arousal and are rewarded for it not only by their own
internal functions but also by their peers around them.

Adults are generally better able to control their risk-taking because their cognitive-control system has
matured enough to the point where it can control the socioemotional network, even in the context of
high arousal or when psychosocial capacities are present. Also, adults are less likely to find
themselves in situations that push them to do risky things. For example, teens are more likely to be
around peers who peer pressure them into doing things, while adults are not as exposed to this sort
of social setting.[46][47]

A recent study suggests that adolescents have difficulties adequately adjusting beliefs in response to
bad news (such as reading that smoking poses a greater risk to health than they thought), but do not
differ from adults in their ability to alter beliefs in response to good news.[48] This creates biased
beliefs, which may lead to greater risk taking.[49]

Decision Traps: Common Decision-Making

Problems and Easy-To-Implement Solutions
by Michael Goldman on December 1, 2006 in More Effective Meetings

Predicting all the potential challenges and pitfalls of an upcoming facilitation is an onerous
task, even for the most seasoned facilitator. During one of my recent facilitation training
sessions, stories of decision-making events gone wrong were the pervasive theme among
participants. As a result of these discussions, I decided to reflect on my own personal
 experiences to create a matrix that identifies decision-making pitfalls or ‘traps’ and
suggestions that might help facilitators avoid such errors.

My sense is that what makes decision-making effective lies mostly in the initial context
setting before even entering into the decision-making discussion. My experience has shown
me that the more we educate participants in the decision-making process, the more
cooperative they end up being with one another during the discussion.

Below I’ve outlined ten potential ‘decision traps’ (there’s many more!) that you may
encounter during a decision-making discussion. I’ve also added some ‘remedies’ as to what
could be done to avoid these problems. As usual, the techniques used are dependent on
the facilitator’s ability to convey these ideas/activities as simply as possible. Always test the
group for understanding to ensure your ideas/activities have been understood. Good luck
with your meeting!

1. People not clear about their level of decision-making authority

regarding the decision. This leaves participants unsure as to how
committed they should be in the decision-making process.
Remedy: Determine and express up front their level of decision-making authority. They
need to know where they fall on the continuum of empowerment. Let them know up front
what will happen with their decision(s), which:
 may or may not be used as input/feedback by management in making a final decision.
 most likely will be accepted by management who reserves the right to have the group tweak
areas of concern.
 will be accepted as the final decision.
2. The wrong or inappropriate people are sitting at the table.
Remedy: At times I have facilitated meetings where the key stakeholders have sent directs
or representatives in their place. This makes for a difficult discussion as the key people who
will own the decision are not present. The likelihood of the follow-through by these missing
people is negligible – to say the least.
As the facilitator you need to acknowledge if people have decision-making authority and, if
not, what needs to happen to ensure that any recommendations that flow from the meeting
have a strong likelihood of being followed through. Members who do attend that have
decision-making authority should help formulate how they can support the decision maker’s
representatives in getting buy-in for the decision.
If any resistance to this is present, then the meeting should not be focused on making a
decision but, rather, “what do we all need to do to ensure the right people are at the table
during the next meeting?”

3. People lack the right information to engage in thorough discussion

of the decision options.
Remedy: Ensure information that will place all participants on the same page is distributed
before the session for their perusal. Ensure they understand the implications of having not
read the information (i.e. those more informed may sway others; everyone will have to live
with the results; more knowledge of decision options = better quality decision(s), etc.)
4. People walk into the decision-making meeting already biased on a
position (personal agenda).
Remedy: One of the first activities is to set some targeted meeting norms to address “how
will we ensure that all ideas are heard without personal agendas getting in the
way?”Flipchart these ideas and make sure that you actively referee this.
If I know ahead of time that people are walking in biased, I have them all engage in stating
their personal agendas or ‘wants’ up front so everyone knows where everyone is coming
from. This takes courage on the part of the participants and I challenge them to do so. Once
the agendas are disclosed, we then engage in a discussion to discern each person’s
‘needs’ or ‘underlying interests’ rather than ‘wants.’ We then determine what needs are held
in common. Needs that do not overlap are the points that we engage in during the
negotiation of a final decision.

5. Unclear ‘criteria’ for determining the best decision.

Remedy: Quite often, especially during priority setting, we have the group determine key
criteria to rank priorities against. Ensure that the group engages in a good debate as to
what makes some criteria more important than others. It’s important that the criteria chosen
supports and falls within the organizational strategy as well as the group’s particular needs.
Test all participants’ knowledge of what the criteria means. Before ranking items against the
criteria, ensure the group discusses thoroughly how each possible decision meets or fails
the criteria.
6. Level of status or influence amongst different members is
unbalanced. Direct reports or junior management defer from ‘speaking
up’ or contradicting upper management for fear of reprisal.
 Remedy: Engage in a discussion with the ‘power(s) that be’ preceding the discussion as to
how they see their role(s) during the decision-making meeting. Roles could include:
 objective observer
 feedback coach
 equal team member
 critic
 SME, etc.
Have the senior manager declare his/her role upfront and acknowledge what that role
entails (e.g. an objective observer sits back and observes. A feedback coach, at a
designated time, asks stimulating questions that will provoke and expand discussion, etc.)

7. An assumption on the part of the facilitator that asking, ‘does

everyone agree?’ will evoke valid feedback. Yet, a few days later,
word gets around that one of the participants is bad-mouthing the
decision. Or, worse, little follow-through or commitment is
demonstrated.
Remedy: I learned early on in my career as a meeting facilitator that looking for ‘nods’ of
agreement was an unreliable and, at times, invalid method for testing for agreement. I
learned quickly that the use of a quantitative approach or the ‘4 finger approach’ proved to
be more useful in indicating the ‘degree’ of agreement with each participant. People are
shown and asked to show their degree of agreement using the respective number of fingers
(or call out verbally). This looks like:
 1 finger = hate the decision (veto). Which finger is shown here is always of great interest!
 2 fingers = like the decision, but some changes have to be made (compromise). The peace
symbol always gives room for hope that all participants will at least feel like they won
something!
 3 fingers = can live with it (consensus). This tends to be good enough for most people
 4 fingers = love it! When this happens, it’s a bonus!
If anyone displays 2 or less fingers, then a discussion focused on how to raise their level of
agreement to at least a ‘3’ should ensue. Ask, “what will it take to move your level of
agreement to at least a 3?” Remember to ratify changes with the rest of the group as one
person’s changes may lower the level of buy-in from the others.

8. Lack of sufficient time for a comprehensive discussion

Remedy: It’s quite evident that as you increase certain factors in a decision-making
process, more time will be required to build a consensus. These factors typically include:
 the number of people involved in the discussion
 the complexity of the decision
 the degree of agreement required by all
 the degree of impact the decision will have on everyone (and beyond this group)
Therefore, trying to facilitate a decision that is highly impactful and complex in 1.5 hours
with 18 people is probably a recipe for failure. Now, don’t get me wrong, you might arrive at
a decision, but I question its quality.

Having facilitated countless numbers of consensus-driven sessions over the years, I’ve
found that the quality of a decision increases by:

 the amount of time taken to analyze all the relevant facts, opinions
 and, equally important, tapping into underlying emotions to determine each player’s degree
of passion towards the decision.
9. Lack of logical, relevant process/methodology that structures the
steps of the decision-making discussion
Remedy: Every facilitator must understand the five different options available to any group
for making decision, such as:
 collaborative decision-making (e.g. win/win or principle-based negotiation, systematic
problem-solving, etc.)
 positional negotiation
 delegation
 majority voting
 prioritization
Sure there are some others like ‘tossing a coin’ or ‘leave it to fate’, but these usually don’t
allow for rational decision-making.

10. The facilitator rarely asks for feedback from the group in terms of
how well the process is working.
Remedy: During any decision-making discussion the facilitator is responsible for checking
the five P’s. These are:
1. Purpose: “are we on purpose here? Are we on target with our discussion?”
2. Process: “are these discussion steps/tools effective in helping us reach our goal?”
3. Pace: “are we moving fast enough?
4. Pulse: “are people still alive?”
5. Progress: ” are people seeing us making movement?”
© 2006 – 2014, Michael Goldman. All rights reserved.
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 Michael Goldman
Michael Goldman is President of Facilitation First, a company that specializes in providing
professional meeting facilitation and training. He can be reached at 416-465-9494.
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