Decision Making

The Classical Model

In the classical model, decision making is a rational activity the purpose of which is to maximize the achievement of organizational goals. Decision making is an orderly process with its own inherent logic embedded in a series of actions that succeeded one another in a sequential manner. In 1974, management theorist Peter F. Drucker described a five-step decision-making process that was widely used in public and private organizations in the United States and elsewhere. The five steps were as follows:

• 1.
  Define the problem
• 2.
  Analyze the problem
• 3.
  Develop alternative strategies
• 4.
  Decide on the best solution
• 5.
  Convert the solution into action

In practice, there are severe limitations to the classical model. Decision makers rarely have access to all the information needed to make a decision. Identifying all available alternatives and their consequences is impossible, and decision makers do not possess the information-processing capacities needed to make a rational decision. The classical model is a norm rather than a description of how decisions are actually made.

The Administrative Model

If administrators are unable to make completely rational decisions that optimize the achievement of organizational goals, they instead concentrate on finding a satisfactory solution to problems. Seeking a satisfactory solution in an environment of limited rationality is called satisficing. In satisficing, decision makers typically follow a pattern of action that includes

• Recognizing or defining a problem or issue
• Analyzing the difficulties in a situation
• Establishing the criteria for a satisfactory decision
• Developing a strategy for action
• Implementing an action plan
• Evaluating the outcome

This pattern is both sequential and cyclical, since it may be entered into at any stage.

Incremental Decision Making

In some circumstances, alternatives are difficult to discern or the consequences of each alternative are so complicated as to be impossible to predict. Under these conditions, neither rational decision making nor satisficing is appropriate. Another process has been called “muddling through.” This model involves [Page 272]decision makers in identifying solution alternatives that are similar to an existing situation and then assessing their consequences until agreement on a course of action is reached. The final solution differs only incrementally from the existing situation; hence the name “incremental” decision making. A “good” decision is one on which decision makers agree. Decisions are based on the assumption that incremental changes will reduce the chance of negative consequences for the organization.

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