What is Rational Decision Making in MIS?

A rational decision is the one which, effectively and efficiently. Ensures the achievement of the goal for which the decision is made. If it is raining, It is rational to look for a cover so that you do not get wet. If you are in business and want to make profit, then you must be produce goods and sell them at a price higher than cost of production. In reality, there is no right or wrong decision but a rational or an irrational decision. The quality of decision-making is to be judge on the rational and not necessarily on the result it produces.

                   

Fig: Process of decision making

                     The rationality of the decision made is not the same in every situation. It will vary the organisation, the situation and the individual's view of the business situation. The Rationality, therefore, is a multidimensional concept. For Example:- the business decisions in a private organisation and a public sector undertaking differ under the head of rationality. The reason for this difference in rationality is the different objectives of the decision makers. Any business decision if review by a shareholder, a consumer, an employee, a supplier and a social scientist, will result in a different critiscum due to difference individual's rationality this is because each one of them will view the situation in different contexts and the motive with in different objectives, Hence, weather a decision is right or wrong depends on a specific rational view. 

Simon Herbert A* differentiates among the types of rationality. A decision, in a given situation is: 

• Objectively Rational: If it maximizes the value of the objectives.
• Subjectively Rational: If it maximizes the attainment of value within limitation of the knowledge and awareness of the subject. 
• Consciously Rational: The extent the process of the decision- making is deliberate and a conscious one. 
• Organizationally Rational:  The degree if the orientation towards the organisation. 
• Personally Rational: The extent it achieves and individual's personal goals.

In other words, So long as the decision maker can explain with logic and reason, the objectivity and the circumstances in which the decision is made, it can be termed as a rational decision. Whether the rationality applied is appropriate or not could be point for debate.

Rational decision making in mis from Management Study online

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What is the problems in Decision making?

1. Ascertaining the Problems: According to Peter Drucker Point of View "The most common source of mistakes in the management decisions is the emphasis on finding the right answers rather than the right question's." The main task is to define the actual problem very clearly. The management may find out the problem as the "Quality of the product is Poor". But actually Quality of the product is too Better as compare with competitors product. the real problem is maybe somewhere else. For Example: - The Problem may be the Poor quality of the product and you thinking to improving the quality of the advertising.


2. Insufficient Knowledge: For relevant decision, Decision maker need total information about problem and its alternative solution for the decision making, if complete knowledge is not study by the decision maker. Decision maker fail to make a rational decision so, An important function of a manager/decision maker is to determine the dividing line is reached between insufficient knowledge and the enough information to make a decision.


3. Not Enough Time to be Rational: In Any business organisation a decision maker in under pressure to make decision, If time is limited, He/she may make hasty decision. Which may not satisfy the test of rationality of decision. 


4. The Environment may not cooperate: Sometimes, the timing of the decision is such that one is forced to make decision but the environment is not conductive for it. The decision may fail to test of rationality as the environmental factors considered in the decision-making turn out to be untrue. For Example:- In the Product Pricing, the factors of oil and petroleum product price is considered as stable. but the post-decision environment proves the consideration to be wrong.  


5. Other Limitations: Other Limitation are the need for a compromise among the different positions, Misjudging the monitor and values of people, Poor communications, Misappraisal of uncertainties and risks, and inability to handle the available knowledge and human behavior. 

Problems in Decision Making from Management Study online

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Herbert Simon Decision Making Model

Herbert Simon made key contributions to enhance our understanding of the decision-making process. In fact, he pioneered the field of decision support systems. According to (Simon 1960) and his later work with (Newell 1972), decision-making is a process with distinct stages. He suggested for the first time the decision-making model of human beings. His model of decision-making has three stages:

1. Intelligence which deals with the problem identification and the data collection on the problem.
2. Design which deals with the generation of alternative solutions to the problem at hand.
3. Choice which is selecting the 'best' solution from amongst the alternative solutions using some criterion.

The figure given below depicts Simon's decision-making model clearly.

Simon's decision-making model

Intelligence Phase: 

• This is the first step towards the decision-making process. In this step the decision-maker identifies/detects the problem or opportunity. A problem in the managerial context is detecting anything that is not according to the plan, rule or standard. An example of problem is the detection of sudden very high attrition for the present month by a HR manager among workers. Opportunity seeking on the other hand is the identification of a promising circumstance that might lead to better results. An example of identification of opportunity is-a marketing manager gets to know that two of his competitors will shut down operations (demand being constant) for some reason in the next three months, this means that he will be able to sell more in the market. Thus, we see that either in the case of a problem or for the purpose of opportunity seeking the decision-making process is initiated and the first stage is the clear understanding of the stimulus that triggers this process. So if a problem/opportunity triggers this process then the first stage deals with the complete understanding of the problem/opportunity. Intelligence phase of decision-making process involves:

                            a. Problem Searching
                            b. Problem Formulation

• Problem Searching: For searching the problem, the reality or actual is compared to some standards. Differences are measured & the differences are evaluated to determine whether there is any problem or not.

• Problem Formulation: When the problem is identified, there is always a risk of solving the wrong problem. In problem formulation, establishing relations with some problem solved earlier or an analogy proves quite useful.

Design Phase: 

• Design is the process of designing solution outlines for the problem. Alternative solutions are designed to solve the same problem. Each alternative solution is evaluated after gathering data about the solution. The evaluation is done on the basic of criteria to identify the positive and negative aspects of each solution. Quantitative tools and models are used to arrive at these solutions. At this stage the solutions are only outlines of actual solutions and are meant for analysis of their suitability alone. A lot of creativity and innovation is required to design solutions.

Choice Phase:

• It is the stage in which the possible solutions are compared against one another to find out the most suitable solution. The 'best' solution may be identified using quantitative tools like decision tree analysis or qualitative tools like the six thinking hats technique, force field analysis, etc.
• This is not as easy as it sounds because each solution presents a scenario and the problem itself may have multiple objectives making the choice process a very difficult one. Also uncertainty about the outcomes and scenarios make the choice of a single solution difficult.

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Role of Information in Decision Making

Information plays a vital role in decision-making. Even to take very simple decisions, we need information. To understand the role played by information in decision-making, we have to understand how decisions are taken. Decision-making is basically a process that includes the following stages:

               

      Information is thus, very important to take decisions. Imagine a simple decision like the one a driver (say) makes when he puts on the brakes to stop a speeding vehicle when he sees a child crossing the road (in middle of the road). The driver decides on braking based on a lot of information processing that happens in his brain. At every stage of the decision-making he uses information that he captures visually. All decisions are like this.

First we get information about a problem, format it into a structure and then factor in the information about the context in which the problem has occurred. Like in the above case instead of the child being at the middle of the road and crossing it, the driver would have seen the child about to cross over with a few steps only he would probably not have braked to stop but would have slowed down, as he would have calculated that by the time the vehicle reaches the crossing stage, the child would already have passed. So if the problem was structured as 'how to not hit the child crossing the road?', and if the child was at the middle of the road, the driver would have braked but had the child been at (say) at ninety per cent completion level of crossing the road, the driver would have only slowed down and not braked to stop. Therefore, we see that the context has a major role in the decision-making and information is required both about the problem and about the context in which the problem occurred. The next stage for the decision maker would be to generate alternatives. In the driver's case such possible alternatives would be

Stages of Decision-making	Role of Information
Identification and structuring of problem/opportunity	One needs information to identify a problem and put it in a structured manner. Without information about a problem or opportunity, the decision-making process does not even start.
Putting the problem/ opportunity in context	Without information about the context in which the problem has occurred, one cannot take any decision on it. In a way, the information about the context defines the problem.
Generation of alternatives	Information is a key ingredient in the generation of alternatives for decision-making. One has to have information about possible solutions to generate alternatives.
Choice of best alternative	Based on the information about the suitability of the alternatives, a choice is made to select the best alternative.

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what is the types of Decision Making

Organizational decisions differ in a number of ways. The following basis are used to classify the decisions:

Ø On the Basis of Purpose of Decision-making:

On the basis of the purpose of decision-making activities, the organizational decisions can be divided into 3 types:

• Strategic Planning Decisions: Strategic planning decisions are those decisions in which the decision-maker develops objectives and allocates resources to achieve these objectives. Such decisions are taken by strategic planning level (top level) managers.

• Tactical Decisions: Management control decisions (Tactical decision) are taken by management control level (middle level) managers and deal with the use of resources in the organization.

• Operational Decisions: Operational decisions deal with the day-to-day activities and problems that affect the operation of the organization. These decisions are taken by the managers at operational level (bottom level) of the organization.

Ø On the Basis of Levels of Programmability:

Simon on the basis of level of the programmability of a decision, proposed two types of decisions:

• Structured Decisions: Programmed or structured are those decisions, which are well defined and some specified procedure or some decision rule might be applied to reach a decision. Such decisions are routine and repetitive and require little time for developing alternatives in the design phase. Programmed or structured decisions have traditionally been made through habit, by operating procedures or with other accepted tools.

• Unstructured Decision: Decisions, which are not well defined and have not pre-specified procedures decision rule are known as unstructured or non-programmed decisions.

Ø On the Basis of Knowledge of Outcomes:

Another approach of classifying decisions is the level of knowledge of outcomes. An outcome defines what will happen, if a decision is made or course of action taken. When there is more than one alternative, the knowledge of outcome becomes important. On the basis of the level of knowledge of outcomes, decision-making can be classified into three categories.

• Decision under certainty: Decision-making under certainty takes place when the outcome of each alternative is fully known. There is only one outcome for each alternative.

• Decision under risk: Decision-making under risk occurs when there is a possibility of multiple outcomes of each alternative and a probability of occurrence can be attached to each outcome.

• Decision under uncertainty: Decision-making under uncertainty takes place when there are a number of outcomes for each alternative & the probabilities of their occurrences are not known.

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Meaning & Characterstic of Decision Making in MIS

A decision is the choice out of several options made by the decision maker to achieve some objective in a given situation. A number of experts consider decision making as the single most important managerial function. Decisions are made at different levels in the organization structure, The decision made at different level vary in their content, Risk involved, complexity and the Implications. The information support required to decision making process varies according to the type of Decision and the level within the organization at which such is being made.

• The thought process of selecting a logical choice from the available options.
• When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation.


Decision: A decision is the choice out of several options made by the decision maker to achieve some objective in a given situation.
Business Decision: Business decisions are those which are made in the process of conducting business to achieve its objective in a given situation.

Characteristic of Business Decision Making:

a) Sequential in nature.
b) Exceedingly complex due to risk and trade off.
c) Influenced by personal values.
d) Made in institutional setting and business environment.

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