MODELS OF DECISION MAKING

- Process Model -

“Minds are like parachutes. They only function when they are open.”
    - Richards J. Heuer, Jr.

Problem solving and decision-making are important skills for business and life. Problem-solving often
involves decision-making, and decision-making is especially important for management and leadership.
There are processes and techniques to improve decision-making and the quality of decisions. Decision-
making is more natural to certain personalities, so these people should focus more on improving the quality
of their decisions.

The Decision-Making Process Model

- provides a framework and guidelines for working through to a logical conclusion, questions which
require action
 Stages/Phases of Process Model

1. IDENTIFICATION PHASE

Recognition

- describing why a decision is called for.

- One way of deciding if a problem exists is to couch (state) the problem in terms of what
one wanted or expected and the actual situation. In this way a problem is defined as
the difference between expected and/or desired outcomes and actual outcomes.

Diagnosis

- identifying the most desired outcome(s) of the decision making process.

- This careful attention to definition in terms of outcomes allows one to clearly state the
problem. This is a critical consideration because how one defines a problem
determines how one defines causes and where one searches for solutions.

2. DEVELOPMENT PHASE

Search

- seeking information that would give clarity to the given problem.

- When a consumer discovers a problem, he/He is likely to search for more information.
Through gathering information, the consumer learns more about some solutions that are
valuable in solving the problem and their features and characteristics.

Design

- formulation of possible solutions for the identified problem.

- Devise multiple solutions for study and evaluation. If you only have one alternative, you do
not have a decision.

3. SELECTION PHASE

Screen

- it indicates whether a solution is desirable based on some previously established

minimum criterion or criteria /Standard Operating Procedures (SOP).

Analysis

- analyzing the information and hypothesizing about positive and negative consequences.
 - As you evaluate each alternative, you should be looking at the likely positive and negative
cones for each. It is unusual to find one alternative that would completely resolve the
problem and is heads and shoulders better than all others. Differences in the "value" of
respective alternatives are typically small, relative and a function of the decision maker's
personal perceptions, biases and predispositions.

- This distinction between fact-based evaluation and non-fact -based evaluation is included
to assist the decision maker in developing a "confidence score" for each alternative. The
decision maker needs to determine not just what results each alternative could yield, but
how probable it is that those results will be realized. The more the evaluation is fact-based,
the more confident he/He can be that the expected outcome will occur.

Judgment

- evaluating desirability of various choices.

Authorization

- implementing the best solution for the problem encountered

- It is not enough to think about it or talk about it or even decide to do it. A decision only
counts when it is implemented. As Lou Gerstner (CEO of IBM) said, "There are no more
prizes for predicting rain. There are only prizes for building arks."

Sample of Process Model Decision Making

Problem Recognition

In this information processing model, the consumer buying process begins when the buyer recognizes a
problem or need. For example, Doug may realize that his best suit doesn’t look contemporary any more.
Or, Person A may recognize that her personal computer is not performing as well as He thought it should.
These are the kinds of problem that we as consumers encounter all the time. When we found out a
difference between the actual state and a desired state, a problem is recognized. When we find a problem,
we usually try to solve the problem. We, in other words, recognize the need to solve the problem. But
how?

Information Search and Design

When a consumer discovers a problem, he/He is likely to search for more information. Person A may
simply pay more attention to product information of a personal computer. He becomes more attentive to
computer ads, computers purchased by her friends, and peer conversations about computers. Or, He may
more actively seek information by visiting stores, talking to friends, or reading computer magazines, among
others. Through gathering information, the consumer learns more about some brands that compete in the
market and their features and characteristics. Theoretically, there is a total set of brands available to
Person A, but He will become aware of only a subset of the brands ( awareness set) in the market. Some of
these brands may satisfy her initial buying criteria, such as price and processing speed ( consideration set).
As Person A proceeds to more information search, only a few will remain as strong candidates (choice set).

Screen and Analysis of Alternatives

How does the consumer process competitive brand information and evaluate the value of the brands?
Unfortunately there is no single, simple evaluation process applied by all consumers or by one consumer in
all buying situations.

One dominant view, however, is to see the evaluation process as being cognitively driven and rational.
Under this view, a consumer is trying to solve the problem and ultimately satisfying his/her need. In other
words, he/He will look for problem-solving benefits from the product. The consumer, then, looks for
products with a certain set of attributes that deliver the benefits. Thus, the consumer sees each product as
a bundle of attributes with different levels of ability of delivering the problem solving benefits to satisfy
his/her need. The distinctions among the need, benefits, and attributes are very important.

Decision Judgment

To actually implement the purchase decision, however, a consumer needs to select both specific items
(brands) and specific outlets (where to buy) to resolve the problems. There are, in fact, three ways these
decisions can be made: 1) simultaneously; 2) item first, outlet second; or 3) outlet first, item second. In
many situations, consumers engage in a simultaneous selection process of stores i and brands. For
example, in our Person A’s personal computer case, He may select a set of brands based on both the
product’s technical features (attributes) and availability of brands in the computer stores and mail-order
catalogs He knows well. It is also possible, that He decides where to buy (e.g., CompUSA in her
neighborhood) and then chooses one or two brands the store carries. Once the brand and outlet have been
decided, the consumer moves on to the transaction (“buying”).

Implementation or Authorization

Implementation or Authorization processes are directly influenced by the type of preceding decision-making
process. Directly relevant here is the level of purchase involvement of the consumer. Purchase
involvement is often referred to as “the level of concern for or interest in the purchase” situation, and it
determines how extensively the consumer searches information in making a purchase decision. Although
purchase involvement is viewed as a continuum (from low to high), it is useful to consider two extreme
cases here. Suppose one buys a certain brand of product (e.g., Diet Pepsi) as a matter of habit ( habitual
purchase). For him/her, buying a cola drink is a very low purchase involvement situation, and he/He is not
likely to search and evaluate product information extensively. In such a case, the consumer would simply
purchase, consume and/or dispose of the product with very limited post-purchase evaluation, and generally
maintain a high level of repeat purchase motivation.
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