What are the differences between decision-making models in Business management?

Business Management is a course that includes business courses and liberal arts courses. By completing this course, you can go for A.A.S (Australian Accounting Standard) degree. There are four trades or branches (Marketing, General Management, Finance and Travel-Tourism) for completing the business management course. The three different types of decision-making models include

Administrative Man Model:

The model that looks for alternative options and considers assumptions for fulfilling requirements of consumers is known as Administrative Man Model. This model works on the concept provided by Herbert Simon. The entire decision making process works for success of all users and not one specific user.

• This model does not checks individual rationality for making decisions.
• This is a descriptive model that properly tells how to make decisions
• This model focuses on achieving goals in a definite period of time.

Rational Decision-Making Model:

This is a prescriptive model that tells how decisions need to be made. The model in which businessmen or managers understand all respective decisions at a specific time before finalizing them is known as rational decision making model:

• This model search for all respective alternatives for the best results
• This is the oldest type of model that works on a hierarchy (steps).
• This model works on achieving clear objectives.

Implicit Favorite Model 

Also known as Retrospective decision model, this model works on changing decisions and choices once they have been made. The justifying process helps in achieving more effective results.

• Here, a particular search for alternatives is done till the best is found.
• In this model, managers take logical decisions on all essential topics
• Mostly, the rational decisions are made again for better results.

Decision making is a process of discussion through which an optimal opinion and option can be derived to conduct a particular task by analyzing the pros and cons of all possible choices ensuring minimum risk and maximum benefit. Decision making involves the techniques and methods used in the process of decision making.

It includes a cost-benefit analysis to reach up to a decision which will be beneficial in economic and social terms. The process of decision making has to be analyzed at every step of implementation to ensure the success of the decision.

According to the famous administrative thinker, Chester Barnard, decision making is an essential part of an organizational action. The other thinkers related to the process of decision making are Simon, Henry Fayol, Gullick, Etzioni, Dror etc.

Types of Decisions in an Organization:

• Programmed DM- The programmed decisions are of a routine nature. This type of decision making can be delivered to the lower level of an organization. They are used repeatedly in an organization.
• Non-Programmed DM- these are of unique and non-repetitive nature. They are taken by the higher authority and are taken in a few times. Simon’s Model of DM: Simon’s model of decision making involves 3 aspects of decision making-
• Individual’s decision choice- It is further divided into three parts; individual activity stage, design activity stage and choice activity stage.
• Fact-value dichotomy- according to Simon each decision involves two aspects; fact that includes logic and proven examples, and values such as god or bad, right or wrong.
• Bounded rationality- as per Simon’s DM model, the bounded rationality DM has 6 aspects of rationality in DM. They are subjective, objective, conscious, deliberate, personal and organizational.

The other models of decision making are:

The idea of incrementalism by Charles Lindblom: in his paper “ The art of muddling through” Lindblom disagreed with the Simon’s DM. He said, instead of making a rational decision and taking a big decision all of a sudden, little changes are required step by step.

• Mixed Scanning Model of Etzioni- Etzioni has given a mixture of incrementalism and rational decision making. As per this model, the whole area should be studied first, then the small issues should be focused.
• Optimal Model of DM by Dror- Dror suggested a qualitative approach through a feedback mechanism. He gave a model combining the rational and extra-rational issues of decision making.
• Game theory of DM- this type of decision is taken where there are n number of organizations working on the same platform. Here the risk analysis is important in order to achieve profit.