STRATEGY SESSIONS #12

DIFFERENT TYPES OF DECISIONS

by Dr. Steve Payne

 

A rational decision-making process starts with defining one’s problems or needs related to one’s goals.  It next involves generating and evaluating alternatives, and then it concludes with choosing an optimal alternative.  People, though, much more often use a quite limited, rather than a perfect or even a high, degree of rationality in making their decisions.  Seldom do humans actually follow a structured, thorough, and optimizing decision making process. 

 

Even scientists who advocate a scientific-thinking process for important research projects make many decisions in their personal lives and at work that depart from a very systematic and optimizing process.  That’s because all of us face many fairly routine decisions that are made based on finding an option that merely in some way satisfies, rather than optimizes, our needs or values.  Except possibly for more important life decisions, we don’t have the time or see the reason to spend a lot of time generating as many options as possible and then carefully evaluating these for a very best choice.  Instead, we much more often think of decision options over time and evaluate these options then and there according to whether these options seem to satisfy us.  When we initially find an acceptable option, we often take that one and switch our thinking to some other concern or need.  There are many occasions in which such a satisficing, rather than an optimizing, decision approach is appropriate or necessary.   

 

For major decisions in our lives, we can benefit from being more strategic and rational in generating and evaluating alternatives.  We might particularly seek criteria or factors that seem important in evaluating decision alternatives.  In evaluating several competing job offers, for example, we might consider a number of criteria such as pay, location of this employment opportunity, reputation of the company, fringe benefits, etc. relative to our employment or career goals.  If we had several job offers or options to consider, we might evaluate each option in terms of each criterion on some scale (such as 1-5 in terms of an option’s favorability).  Since certain judgment criteria are probably more important to us than others, we could weigh these criteria according to our estimation of their importance in making our job decision (such as .4 or 40% weight in the decision for one criterion, .2 or 20% weight for another criterion, and so on).   Evaluating and selecting options according to such a framework is known as a compensatory decision approach. 

 

There are other decision approaches or rules. One approach to evaluating decision options is to choose the option that meets every criterion by at least some minimum level.  This is commonly how most companies select their employees.  Rather than evaluating each job applicant according to every employment criterion, which would be more expensive, the companies evaluate applicants in serial order.  If they meet some level of acceptance on one criterion, such as an application form or resume, the individual is asked to appear for an initial interview.  Should the applicant do well enough in the first interview, he or she is given a second interview, then possibly some job-related test, and then other criteria for employee selection might be applied, perhaps ending with a physical examination.  More costly criteria, such as health or physical examinations, appear later in this serial selection process when many initial applicants have been screened out of the decision and selection procedure. 

 

In real life, unlike in basic math textbooks, options are not all presented at one time for evaluation.  A person seeking a job might get one job offer and then go for weeks or months before obtaining another offer.  The job applicant often does not have the luxury of directly being able to compare these two job offers, or others that might come later.  Job offers are typically open for acceptance for a limited amount of time, and job applicants who receive employment offers don’t know if or when other job offers might come and how attractive these offers might be.  The four-step process that I have recommended for strategic decision making offers useful insights in such cases.