Decision Making – Group & Individual perspective (Part-I)

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Project managers have to make decisions day-in and out. It is an integral part of their job. It could be about whether to add new resources in team, whether to accept new changes by customer, whether to accept/contingent a risk, what to communicate to project sponsors, what customer/team should do when project deliverable gets delayed, etc. Thus their decisions affect project progress and in turn project success. We all know there is a decision making processes (documented/formal, informal/un-documented) in every organization. Let’s take a look at some academic aspects of decision making.

There are three models which attempt to explain how managers/decision makers make decisions.

• Rational Model
• Bounded Rationality Model
• Garbage Can Model

Rational Model

This decision making involves logical thought process, with in-depth analysis of alternatives and their outcomes. This model is based on assumption that decision maker is rational while making the decision. There are certain assumptions in Rational Model of decision making such as

1. The decision maker uses his/her consistent system of preferences
2. The consequence will be entirely rational
3. Decision maker is aware of all possible options
4. And decision maker can determine the likelihood of failure and success for each alternative

As you can see, these assumptions make Rational Model as impractical. In practice, there are constraints of time, resources, information available and knowledge one can process. Additionally, there are individual preferences, etc. All of these factors are not considered in Rational Model.

Bounded Rationality Model

Knowing the inadequacies of Rational Model, another model was proposed that considered the limitations of rationality for human & factors considered in decision making. This model argues that the constraints imposed on decision maker tend to make him lesser rational.

Bounded Rationality Model has few assumptions

1. Decision makers (mostly managers) select first alternative that appears acceptable
2. Decision makers recognizes their understanding of the world is simple
3. Decision makers find it comfortable to make decisions without defining all alternatives
4. Decision makers makes decisions based on common sense or heuristic

As you can notice, this model takes into account preferences of decision makers. When decision makers perceive that a given decision is satisfactory (or acceptable or good enough) they have considered the tradeoff between efforts & time required to collect information for all alternatives and making a decision based on known/available alternatives & heuristics.

Garbage Can Model

This model assumes that the decision making process in organization is not systematic i.e. random. It depicts the organization decision making as a garbage can which contains problems, solutions, users/participants, and alternative opportunities are randomly moving and if these factors connect the decision is made. The quality of the decision depends on whether the solution is correct to a right problem at a right time with a right participant.

Essentially, this model is based on assumption that decisions in organizations are made in a chaotic situation with high uncertainty. But considering today’s fast paced business environment, managers have to make critical decisions in short span of time, with lack of complete information and also be collaborative with the team members.

In the next post we will see what kind of risk appetite decision makers have and how it affects their decision making process.

Reference: Organizational Behavior by Debra Nelson and James C Quick

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