Organizational decision making process

The rational choice model, together with the notion of bounded rationality, provides a basis for a number of prescribed models of organizational decision making in the management and decision support literature (Daft 2006; Cooke and Slack 1984; Power 2002; French et al. 2009; Turban et al. 2011). According to Simon (1997, pp. 122-127) the real world context of organizational decision making and bounded rationality of human decision makers together necessitate following a structured approach and structured process in organizational decision making. The prescribed model of organizational decision making process can be divided in three main phases (Simon 1977, pp. 40-41):

1. Intelligence phase; which involves searching the environment for conditions calling for a decision.

2. Design phase; which involves inventing, developing and analyzing possible courses or action.

3. Choice phase; which involves selecting a particular course of action from those available.

Although the phases of decision making process generally proceed in a linear fashion, the intelligence phase generally preceding the design phase, and the design phase generally preceding the choice phase, the overall process can be more complex than this sequence suggests. Each phase in a particular decision situation can itself be a complex decision making process and the overall decision making process can rather be seen as a series of interdependent and nested sub-processes. For example, the design phase may require new intelligence activities and problems at any given level can generate sub-problems that, in turn, have their own intelligence, design and choice phases. The three main phases can nevertheless usually be clearly distinguished as the organizational decision making process unfolds. (Simon 1977, p. 34)

The prescribed organizational decision making process models generally build on the intelligence, design and choice phases, but frequently also a fourth phase of implementation is added in the models (Daft 2006;

Cooke and Slack 1984; Power 2002; French et al. 2009; Turban et al. 2011). The implementation phase describes the process of implementing a chosen course of action in the organizational context (Turban et al.

2011, pp. 58-59). An example of a prescribed organizational decision making process model that builds on this model is provided by Turban et al. (2011, pp. 45-59). The decision making process model is represented in Figure 15.

Figure 15. Organizational decision making process model (adapted from Turban et al. 2011, p. 46) Intelligence phase

The main intelligence phase activities include problem identification, problem classification and problem decomposition. Problem identification focuses on identifying a potential issue of concern and defining its relation to organizational goals and objectives. Problem situations occur because of dissatisfaction with the perceived present situation in relation to organizational goals and objectives. Dissatisfaction is the result of a difference between what is expected and what is perceived to occur in reality. In this phase, decision makers attempt to determine whether a problem requiring a decision exists, identify its symptoms and determine its magnitude, and explicitly define the problem. Problem classification involves conceptualizing the decision problem in an attempt to place it in a definable category, possibly leading to a standard solution approach for familiar decision problems. Decision problems can be generally categorized according to their degree of structuredness, ranging from totally structured to totally unstructured. Problem decomposition involves dividing complex problems into individual sub-problems. Seemingly unstructured decision problems may frequently be composed of many interrelated and structured sub-problems.

Successful decomposition may potentially allow focusing on solving an interrelated set of structured sub-problems, may help in incorporating both quantitative and qualitative factors into decision models and may facilitate easier communication between individual decision makers. (Turban et al. 2011, pp. 48-50)

Design phase

During the design phase the main activities include model formulation, choice criteria definition and decision alternative generation. Model formulation has the purpose of conceptualizing the decision

problem and abstracting it to an appropriate quantitative or qualitative form or a combination of these.

Model describes the relevant part of the system and the decision problem based on the perceived simplified reality. For many standard problems there are standard classes of models available that provide the basis for model formulation. Choice criteria definition establishes the principle of choice among decision alternatives based on their desirability. Selecting the principle of choice is not part of the choice phase, but is part of defining decision objectives and incorporating those objectives in the formulated decision model. Decision alternative generation has the purpose of developing possible courses of action.

Generating decision alternatives can be a significant and time consuming part of the design phase that involves searching and creativity, is heavily dependent on the availability and cost of information and requires expertise in the problem domain. (Turban et al. 2011, pp. 50-58)

Choice phase

The choice phase is the one in which the actual decision and the commitment to follow a certain course of action are made. Choice phase activities include the search for, evaluation of and recommendation of an appropriate solution to the model. Solving the model, however, is not the same as solving the decision problem that the model represents. The solution to the model only provides a recommended solution alternative to the decision problem, but the decision problem can be considered solved only if the recommended solution alternative is successfully implemented. (Turban et al. 2011, p. 58)

Implementation phase

The implementation phase activities depend on the characteristics of the decision problem and the selected solution alternative, making the activities difficult to define. The phase may potentially include many activities and may involve many members of an organization and a number of other stakeholders, making it a complex process with vague boundaries. A simplistic definition for these activities can be applying the selected solution alternative in practice. (Turban et al. 2011, pp. 58-59)