Beyond Rational Decision Making
Brian Whitworth
1. Introduction
Rational Decision Making:
UUtility theory: selecting options with best payoffs
GGame theory: multiple participants in conflict
MMulti-criteria decision analysis (MCDA): multiple,
and conflicting criteria
BBayesian Analysis: probabilistic information
Why do group managers
usually ignore decision
modelling ?
Group
Answer A: People are stubborn, stupid and resist advances
Answer B: Such models leave out some important factors
1. Introduction
Decision software tools exist:Personal Decision Explorer
1. Introduction
GroupGroup
1. Introduction
Individual
Success stories: Paris metro renovation
• Chemical plant site location• HR: appointing chair of department
Failure or even catastrophe:• scarce resource allocations • Chernobyl nuclear experiment•New Jersey DMV testing fiasco
Social
1. Introduction
• Identify the assumptions of rational decision making
• Understand how socio-psychological processes allow managers to operate beyond these boundaries
• Develop groupware that allows computer-mediated groups to make decisions in realistic business settings
Aim:
• Design communication and data structures to support these processes
• Define those which commonly fail in a business setting
2. Assumptions: Elements
• Alternatives (Xi .. Xj) Behavioral choices leading to expected
outcomes
• Criteria (Cm .. Cn) Outcome evaluation measures
• Model (M): A predictive logic, given information
• Information (IA .. I@) Information relevant to criterion outcomes
• Analysis (A) Method of evaluating expected outcomes
by the criteria • Decider (D) Entity making the decision
The elements of rational decision making:
xf = R (X, C, M, I, A, D)
Figure 1.
RATIONAL
ANALYSIS
Decision
IA
IB
IC
ACTION
OUTCOME
A
B
Ce.g. to open an overseas branch?
Information
MODEL ALTERNATIVES DECIDER
CRITERIA
Alternatives assumed to be
1. Given. Where the alternatives are not known or not
well defined the problem is undefined. Rational decision
making fails.
2. Not a factor in the outcome. Where the decision
action is a factor in the decision, the problem is
recursive. Rational decision making may become
undefined.
2.1 Assumptions
Criteria assumed to be
1. Given. Where the criteria are not known or not well
defined the problem is equivocal. Rational decision
making fails.
2.2 Assumptions
Predictive model assumed to be
1. Valid. Where the model is invalid, or ignores relevant
information, the problem is misunderstood. Rational
decision making may fail, especially in sensitive
situations.
2.3 Assumptions
Information assumed to be
1. Available. Where the required information cannot be
obtained, the decider is uninformed. Rational decision
making may fail if the information fed into it is incomplete.
2. Valid. Where the required information is invalid, the
decider is misinformed. Invalid decisions may arise if the
information fed into the process is invalid.
3. Gatherable without altering the situation. Where other
people may judge gathering of information, which may
change the situation, it can be said to be political.
2.4 Assumptions
Analysis is assumed to be
1. Timely. Where the situation changes significantly during
the time taken for analysis, the problem is mobile.
2.5 Assumptions
Decider is assumed to be
1. Unitary. Where the decider is not unitary, as in any
group decision, there may be conflicting views of the
decision criteria, choice alternatives, predictive models,
and information. Situations where the decision entity is not
unitary, and in conflict regarding the elements of rational
analysis, can be called decider conflicted. E.g. US Steel.
In this case rational analysis becomes undefined.
2.6 Assumptions
Problems which fall beyond rational analysis
1. Undefined. Alternatives not defined
2. Recursive. Decision action is an outcome factor
3. Equivocal. No defined criteria.
4. Mobile. Changes in the time taken for decision.
5. Misunderstood. Predictive model is invalid.
6. Uninformed . Relevant information not available.
7. Misinformed. Available information not valid.
8. Political. Gathering information changes the situation
9. Conflicted. Decision entity is not unitary.
3.1 Summary of Assumptions
Problems common in business
6. Uninformed . Relevant information not available.
7. Misinformed. Available information not valid.
8. Political. Gathering information changes the situation
9. Conflicted. Decision entity is not unitary.
3.1 Summary of Assumptions
Problem causes
1. People. People are the primary sources and
transmitters of information.
2. Groups. Most decisions are made in or for groups.
3.2 C3P Model
It makes sense for decision makers to have processes
that deal with people and groups
(as now suggested by the C3P model)
RATIONAL ANALYSIS
ACTION
PHYSICAL OUTCOME
DECISION ENTITY
Group Outcome
INF
OR
MA
TIO
N S
OU
RC
ES
Interpersonal Outcome
Task Outcome
Interpersonal Process
Group Process
Cognitive Model
• Resolve task information: Informational influence (individual)
• Relating to others: Personal influence (dyadic)
• Representing the group: Normative influence (group)
Resolve task information
• Individual level• Values reasons and truth• One-way, one-to-many• Factual information• Anonymous is ok• Resolve logic problems • Work setting
Relate to others
• Dyadic level• Values relationships• Two-way, one-to-one• Sender information • Anonymous not ok• Build friendships• Informal setting
Represent the group
• Group level• Values unity and agreement• Two-way, many-to-many • Group position information• Anonymous ok• Enacts agreement• Group action
• Identity - the idea of “self” (a cognition)
• Behavior conforms to identity
• Groups form a group identity
• Group members take the group identity into their own identity
• Common identity gives common behavior
We identify with groups, not the people in them
Social identity theory
Why managers don’t use rational decision making
A human judgement based imperfectly on all three
processes is better than a perfect implementation of
one process alone.
3.2
Groupware support
Level I Support rational task analysis and information exchange
Level II Support I, plus personal relationships
Level III Support II, plus groups, norms & social structures
I
I IIII
The Tragedy of the Commons
INDIVIDUAL CHOICES• Graze: Some benefit• Not graze: No benefit
The commons is destroyed and all lose
GROUP CHOICES
• All graze: Resource destroyed!
• None graze: Excess growth
• Some graze: Managed
The commons is preserved and all benefit
Changing the decision entity changes the decision!
Recommend
Design groupware to encourage individuals to change the decision entity
• Group feedback within parties• Providing an area for agreed statements• Rules for items accepted into agreed area• Methods for getting items into agreed area•Recognition that agreed area represents the only area of production in negotiations.
Conclusions
• Despite evidence of human biases, • Business use of rational decision tools is minimal,• As most problems contradict their assumptions • People and groups cause the major contradictions• Social processes are designed to deal with them• Managers apply three processes simultaneously• Groupware should do likewise• Tragedy of commons due to individual rationality• Only forming a group solves the problem• It is irrational for the group to destroy its commons