1. What is Decision Making?

Decision-making is an essential aspect of modern management. It is a primary function of management. A manager's major job is sound/rational decision-making. He takes hundreds of decisions consciously and subconsciously. Decision-making is the key part of manager's activities. Decisions are important as they determine both managerial and organizational actions. A decision may be defined as "a course of action which is consciously chosen from among a set of alternatives to achieve a desired result." It represents a well-balanced judgment and a commitment to action.

It is rightly said that the first important function of management is to take decisions on problems and situations. Decision-making pervades all managerial actions. It is a continuous process. Decision-making is an indispensable component of the management process itself.

Means and ends are linked together through decision-making. To decide means to come to some definite conclusion for follow-up action. Decision is a choice from among a set of alternatives. The word 'decision' is derived from the Latin words de ciso which means 'a cutting away or a cutting off or in a practical sense' to come to a conclusion. Decisions are made to achieve goals through suitable follow-up actions. Decision-making is a process by which a decision (course of action) is taken. Decision-making lies embedded in the process of management.

According to Peter Drucker, "Whatever a manager does, he does through decision-making". A manager has to take a decision before acting or before preparing a plan for execution. Moreover, his ability is very often judged by the quality of decisions he takes. Thus, management is always a decision-making process. It is a part of every managerial function. This is because action is not possible unless a firm decision is taken about a business problem or situation.

This clearly suggests that decision-making is necessary in planning, organising, directing, controlling and staffing. For example, in planning alternative plans are prepared to meet different possible situations. Out of such alternative plans, the best one (i.e., plan which most appropriate under the available business environment) is to be selected. Here, the planner has to take correct decision. This suggests that decision-making is the core of planning function. In the same way, decisions are required to be taken while performing other functions of management such as organising, directing, staffing, etc. This suggests the importance of decision-making in the whole process of management.

The effectiveness of management depends on the quality of decision-making. In this sense, management is rightly described as decision-making process. According to R. C. Davis, "management is a decision-making process." Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. Decision-making will be followed by second function of management called planning. The other elements which follow planning are many such as organising, directing, coordinating, controlling and motivating.

Decision-making has priority over planning function. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as such operating decisions as training of manpower and so on. Without such decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible. For this, scientific decision-making is essential.

2. Definitions of Decision-making

The Oxford Dictionary defines the term decision-making as "the action of carrying out or carrying into effect".
According to Trewatha & Newport, "Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem".

3. Characteristics of Decision Making

Decision making implies choice: Decision making is choosing from among two or more alternative courses of action. Thus, it is the process of selection of one solution out of many available. For any business problem, alternative solutions are available. Managers have to consider these alternatives and select the best one for actual execution. Here, planners/ decision-makers have to consider the business environment available and select the promising alternative plan to deal with the business problem effectively. It is rightly said that "Decision-making is fundamentally choosing between the alternatives". In decision-making, various alternatives are to be considered critically and the best one is to be selected. Here, the available business environment also needs careful consideration. The alternative selected may be correct or may not be correct. This will be decided in the future, as per the results available from the decision already taken. In short, decision-making is fundamentally a process of choosing between the alternatives (two or more) available. Moreover, in the decision-making process, information is collected; alternative solutions are decided and considered critically in order to find out the best solution among the available. Every problem can be solved by different methods. These are the alternatives and a decision-maker has to select one alternative which he considers as most appropriate. This clearly suggests that decision-making is basically/fundamentally choosing between the alternatives. The alternatives may be two or more. Out of such alternatives, the most suitable is to be selected for actual use. The manager needs capacity to select the best alternative. The benefits of correct decision-making will be available only when the best alternative is selected for actual use.
Continuous activity/process: Decision-making is a continuous and dynamic process. It pervades all organizational activity. Managers have to take decisions on various policy and administrative matters. It is a never ending activity in business management.
Mental/intellectual activity: Decision-making is a mental as well as intellectual activity/process and requires knowledge, skills, experience and maturity on the part of decision-maker. It is essentially a human activity.
Based on reliable information/feedback: Good decisions are always based on reliable information. The quality of decision-making at all levels of the Organisation can be improved with the support of an effective and efficient management information system (MIS).
Goal oriented process: Decision-making aims at providing a solution to a given problem/ difficulty before a business enterprise. It is a goal-oriented process and provides solutions to problems faced by a business unit.
Means and not the end: Decision-making is a means for solving a problem or for achieving a target/objective and not the end in itself.
Relates to specific problem: Decision-making is not identical with problem solving but it has its roots in a problem itself.
Time-consuming activity: Decision-making is a time-consuming activity as various aspects need careful consideration before taking final decision. For decision makers, various steps are required to be completed. This makes decision-making a time consuming activity.
Needs effective communication: Decision-taken needs to be communicated to all concerned parties for suitable follow-up actions. Decisions taken will remain on paper if they are not communicated to concerned persons. Following actions will not be possible in the absence of effective communication.
Pervasive process: Decision-making process is all pervasive. This means managers working at all levels have to take decisions on matters within their jurisdiction.
Responsible job: Decision-making is a responsible job as wrong decisions prove to be too costly to the Organisation. Decision-makers should be matured, experienced, knowledgeable and rational in their approach. Decision-making need not be treated as routing and casual activity. It is a delicate and responsible job.

4. Advantages of Decision Making

Decision making is the primary function of management: The functions of management starts only when the top-level management takes strategic decisions. Without decisions, actions will not be possible and the resources will not be put to use. Thus decision-making is the primary function of management.
Decision-making facilitates the entire management process: Decision-making creates proper background for the first management activity called planning. Planning gives concrete shape to broad decisions about business objectives taken by the top-level management. In addition, decision-making is necessary while conducting other management functions such as organising, staffing, coordinating and communicating.
Decision-making is a continuous managerial function: Managers working at all levels will have to take decisions as regards the functions assigned to them. Continuous decision making is a must in the case of all managers/executives. Follow-up actions are not possible unless decisions are taken.
Decision-making is essential to face new problems and challenges: Decisions are required to be taken regularly as new problems, difficulties and challenges develop before a business enterprise. This may be due to changes in the external environment. New products may come in the market, new competitors may enter the market and government policies may change. All this leads to change in the environment around the business unit. Such change leads to new problems and new decisions are needed.
Decision-making is a delicate and responsible job: Managers have to take quick and correct decisions while discharging their duties. In fact, they are paid for their skill, maturity and capacity of decision-making. Management activities are possible only when suitable decisions are taken. Correct decisions provide opportunities of growth while wrong decisions lead to loss and instability to a business unit.

5. Steps Involved In Decision Making Process

Decision-making involves a number of steps which need to be taken in a logical manner. This is treated as a rational or scientific 'decision-making process' which is lengthy and time consuming. Such lengthy process needs to be followed in order to take rational/scientific/result oriented decisions. Decision-making process prescribes some rules and guidelines as to how a decision should be taken / made. This involves many steps logically arranged. It was Peter Drucker who first strongly advocated the scientific method of decision-making in his world famous book 'The Practice of Management' published in 1955. Drucker recommended the scientific method of decision-making which, according to him, involves the following six steps:

Defining / Identifying the managerial problem,
Analyzing the problem,
Developing alternative solutions,
Selecting the best solution out of the available alternatives,
Converting the decision into action, and
Ensuring feedback for follow-up.

The figure given below suggests the steps in the decision-making process:-

Identifying the Problem: Identification of the real problem before a business enterprise is the first step in the process of decision-making. It is rightly said that a problem well-defined is a problem half-solved. Information relevant to the problem should be gathered so that critical analysis of the problem is possible. This is how the problem can be diagnosed. Clear distinction should be made between the problem and the symptoms which may cloud the real issue. In brief, the manager should search the 'critical factor' at work. It is the point at which the choice applies. Similarly, while diagnosing the real problem the manager should consider causes and find out whether they are controllable or uncontrollable.
1. Futurity of the decision,
2. The scope of its impact,
3. Number of qualitative considerations involved, and
4. Uniqueness of the decision.
Analyzing the Problem: After defining the problem, the next step in the decision-making process is to analyze the problem in depth. This is necessary to classify the problem in order to know who must take the decision and who must be informed about the decision taken. Here, the following four factors should be kept in mind:
Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to obtain the relevant information/ data about it. There is information flood in the business world due to new developments in the field of information technology. All available information should be utilised fully for analysis of the problem. This brings clarity to all aspects of the problem.
Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of relevant information, the manager has to determine available alternative courses of action that could be used to solve the problem at hand. Only realistic alternatives should be considered. It is equally important to take into account time and cost constraints and psychological barriers that will restrict that number of alternatives. If necessary, group participation techniques may be used while developing alternative solutions as depending on one solution is undesirable.
Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-making process is to select an alternative that seems to be most rational for solving the problem. The alternative thus selected must be communicated to those who are likely to be affected by it. Acceptance of the decision by group members is always desirable and useful for its effective implementation.
Converting Decision into Action: After the selection of the best decision, the next step is to convert the selected decision into an effective action. Without such action, the decision will remain merely a declaration of good intentions. Here, the manager has to convert 'his decision into 'their decision' through his leadership. For this, the subordinates should be taken in confidence and they should be convinced about the correctness of the decision. Thereafter, the manager has to take follow-up steps for the execution of decision taken.
Ensuring Feedback: Feedback is the last step in the decision-making process. Here, the manager has to make built-in arrangements to ensure feedback for continuously testing actual developments against the expectations. It is like checking the effectiveness of follow-up measures. Feedback is possible in the form of organised information, reports and personal observations. Feed back is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions.

Every step in the decision-making process is important and needs proper consideration by managers. This facilitates accurate decision-making. Even quantitative techniques such as CPM, PERT/OR, linear programming, etc. are useful for accurate decision-making. Decision-making is important as it facilitates entire management process. Management activities are just not possible without decision-making as it is an integral aspect of management process itself. However, the quality of decision-making should be always superior as faulty/irrational decisions are always dangerous.

Various advantages of decision-making (already explained) are easily 'available when the entire decision-making process is followed properly. Decisions are frequently needed in the management process. However, such decisions should be appropriate, timely and rational. Faulty and hasty decisions are wrong and even dangerous. This clearly suggests that various advantages of decision-making are available only when scientific decisions are taken by following the procedure of decision-making in an appropriate manner.

For accurate/rational decision-making attention should be given to the following points:

Identification of a wide range of alternative courses of action i.e., decisions. This provides wide choice for the selection of suitable decision for follow-up actions.
A careful consideration of the costs and risks of both positive and negative consequences that could follow from each alternation.
Efforts should be made to search for new information relevant to further evaluation of the alternatives. This is necessary as the quality of decision depends on the quality of information used in the decision-making process.
Re-examination of the positive and negative effects of all known alternatives before making a final selection.
Arrangements should be made for implementing the chosen course of action including contingency plans in the event that various known risks were actually to occur.
Efforts should be made to introduce creativity and rationality in the final decision taken.

6. Why Rational and Right Decisions Are Not Possible?

Rational decisions are the best decisions under the available circumstances. All decisions should be rational as such decisions facilitate expansion of business and give more profit, goodwill and prosperity to a business unit. Rationality and decision-making are closely related concepts. Rationality principle is applicable to all types of decisions. All decisions (business, economic, social etc.) should be fair and rational. They should serve as examples over a long period. For such decisions, rational/scientific/balanced approach is essential while making decisions. In the absence of such approach, decisions are likely to be faulty and dangerous to the Organisation and also to all concerned parties.

Rationality in decision-making is possible through human brain which has the ability to learn, think, analyze and relate complex facts and variables while arriving at a decision. A manager has to introduce rationality in his decision-making by using his skills, experience, knowledge and mental abilities.

On some occasions, such rational and right decisions are not taken due to variety of possible reasons. It is also possible that the decision taken may be rational when taken but is treated as wrong/irrational/faulty because' the results available from the decision taken are not as expected/positive/encouraging. Rational decisions may not be possible when the approach of the decision-maker is casual and superficial. He may not be alert, careful and cautious while taking the decisions or he might not have followed the decision-making process in a scientific manner. In brief, all business decisions should be rational as far as possible as such rational decisions offer many benefits/advantages. However, rational decisions may not be taken on certain occasions. According to Herbert A. Simon, human beings are not always rational in the decisional process.

7. Reasons Why Rational and Right Decisions May Not Be Possible?

Inadequate information, data and knowledge: For rational decision-making accurate, reliable and complete information about various aspects of the problem under investigation is necessary. The possible future trends can be estimated with the help of such information. This facilitates rational decision-making. However, adequate and reliable information may not be available at the time of decision-making. As a result, the decisions become defective or irrational. Such decision may prove to be faulty in the course of time. This is how the decisions become irrational to certain extent.
Uncertain environment: Decisions are taken on the basis of information available about various environmental variables. However, the variables are many and complex in nature. They may be related to political, economic, social and other aspects. It is not possible to study all such variables in depth due to inadequate information/data. This leads to inaccuracy in decision making and the decisions taken are not fully rational.
Limited capacity of decision-maker. A decision-maker should be expert, knowledgeable, intelligent and matured. He needs vision and capacity to imagine possible future situation. In the absence of such qualities, the decision-maker may not be able to take rational decisions. Similarly, the decision taken may not be rational if the decision-maker fails to follow all necessary steps required for scientific decision-making. A hasty decision or decision taken without full use of all mental faculties may not be fully rational. Thus, decisions are likely to be less rational if the decision maker lacks capacity to take rational decisions.
Personal element in decision-making: Decision-making should be always impartial and also favorable to the Organisation. Decision against Organisation but favorable to decision maker or other employees will be unfair. Such decision will not be rational. Similarly, every decision-maker has his own personal background in the form of personal beliefs, attributes, preferences, likes and dislikes and so on. A decision-maker is expected to keep these elements away while taking management decisions. This may not be possible in the case of all decision-makers and on all occasions. However, decisions are not fully rational when such personal element comes in the picture.
A decision cannot be fully independent: Managerial decisions are interlinked and interdependent. A manager has to make adjustments or compromises while making decisions. For example, for reducing price, some compromise with the quality may be necessary. A manager gives more importance to one and less to the other. He takes one decision which is rational at the same time makes some compromise in the other decision. As a result, other decision is not likely to be fully rational. In short, business decisions are interlinked. This brings an element of irrationality in some decisions.

The points noted above suggest why it is not possible to take rational and right decisions on all occasions.

8. Relationship Between Planning and Decision-making

There is close relationship between planning and decision-making. Decision-making has priority over planning function. It is the starting point of the whole management process. In fact, decision-making is a particular type of planning. A decision is a type of plan involving commitment to resources for achieving specific objective. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as operating decisions such as training of manpower and so on. Without management decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible. For this, scientific decision-making is essential.

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ecision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice.[1] The output can be an action or an opinion of choice.

Contents

[hide]

1 Overview
2 Problem analysis vs decision making
3 Everyday techniques
4 Decision making stages
5 Decision making steps
6 Cognitive and personal biases
7 Post-decision analysis
8 Cognitive styles
- 8.1 Influence of Myers-Briggs type
- 8.2 Optimizing vs. satisficing
- 8.3 Combinatoral vs. positional
9 Neuroscience perspective
10 See also
11 References

[edit] Overview

Human performance in decision terms has been the subject of active research from several perspectives.

From a psychological perspective, it is necessary to examine individual decisions in the context of a set of needs, preferences an individual has and values they seek.
From a cognitive perspective, the decision making process must be regarded as a continuous process integrated in the interaction with the environment.
From a normative perspective, the analysis of individual decisions is concerned with the logic of decision making and rationality and the invariant choice it leads to.[2]

Yet, at another level, it might be regarded as a problem solving activity which is terminated when a satisfactory solution is reached. Therefore, decision making is a reasoning or emotional process which can be rational or irrational, can be based on explicit assumptions or tacit assumptions.

One must keep in mind that most decisions are made unconsciously. Jim Nightingale, Author of Think Smart-Act Smart, states that "we simply decide without thinking much about the decision process." In a controlled environment, such as a classroom, instructors encourage students to weigh pros and cons before making a decision. However in the real world, most of our decisions are made unconsciously in our mind because frankly, it would take too much time to sit down and list the pros and cons of each decision we must make on a daily basis.[citation needed]

Logical decision making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions. For example, medical decision making often involves making a diagnosis and selecting an appropriate treatment. Some[which?] research using naturalistic methods shows, however, that in situations with higher time pressure, higher stakes, or increased ambiguities, experts use intuitive decision making rather than structured approaches, following a recognition primed decision approach to fit a set of indicators into the expert's experience and immediately arrive at a satisfactory course of action without weighing alternatives. Recent robust decision efforts have formally integrated uncertainty into the decision making process. However, Decision Analysis, recognized and included uncertainties with a structured and rationally justifiable method of decision making since its conception in 1964.

A major part of decision making involves the analysis of a finite set of alternatives described in terms of evaluative criteria. These criteria may be benefit or cost in nature. Then the problem might be to rank these alternatives in terms of how attractive they are to the decision maker(s) when all the criteria are considered simultaneously. Another goal might be to just find the best alternative or to determine the relative total priority of each alternative (for instance, if alternatives represent projects competing for funds) when all the criteria are considered simultaneously. Solving such problems is the focus of multi-criteria decision analysis (MCDA) also known as multi-criteria decision making (MCDM). This area of decision making, although it is very old and has attracted the interest of many researchers and practitioners, is still highly debated as there are many MCDA / MCDM methods which may yield very different results when they are applied on exactly the same data.[3] This leads to the formulation of a decision making paradox.

[edit] Problem analysis vs decision making

It is important to differentiate between problem analysis and decision making. The concepts are completely separate from one another. Traditionally it is argued that problem analysis must be done first, so that the information gathered in that process may be used towards decision making.[4]

Problem analysis

Analyze performance, what should the results be against what they actually are
Problems are merely deviations from performance standards
Problem must be precisely identified and described
Problems are caused by a change from a distinctive feature
Something can always be used to distinguish between what has and hasn't been effected by a cause
Causes to problems can be deducted from relevant changes found in analyzing the problem
Most likely cause to a problem is the one that exactly explains all the facts

Decision making

Objectives must first be established
Objectives must be classified and placed in order of importance
Alternative actions must be developed
The alternative must be evaluated against all the objectives
The alternative that is able to achieve all the objectives is the tentative decision
The tentative decision is evaluated for more possible consequences
The decisive actions are taken, and additional actions are taken to prevent any adverse consequences from becoming problems and starting both systems (problem analysis and decision making) all over again
There are steps that are generally followed that result in a decision model that can be used to determine an optimal production plan.[5]
In a situation featuring conflict, role-playing is helpful for predicting decisions to be made by involved parties.[6]

Decision planning

Making a decision without planning is fairly common, but does not often end well. Planning allows for decisions to be made comfortably and in a smart way. Planning makes decision making a lot more simpler than it is. Decision will get four benefits out of planning: 1. Planning give chance to the establishment of independent goals. It is a conscious and directed series of choices. 2. Planning provides a standard of measurement. It is a measurement of whether you are going towards or further away from your goal. 3. Planning converts values to action. You think twice about the plan and decide what will help advance your plan best. 4. Planning allows to limited resources to be committed in an orderly way. Always govern the use of what is limited to you (e.g. money, time, etc.)[7]

[edit] Everyday techniques

Some known decision making techniques include:

Pros and cons: listing the advantages and disadvantages of each option, popularized by Plato and Benjamin Franklin.[8] Contrast the costs and benefits of all alternatives. Also called Rational decision making.
Simple prioritization: choosing the alternative with the highest probability-weighted utility for each alternative (see Decision analysis)
Satisficing: examining alternatives only until an acceptable one is found.
Elimination by Aspects: choosing between alternatives using Mathematical psychology[9] Technique was introduced by Amos Tversky in 1972. It is a covert elimination process that involves comparing all available alternatives by aspects. The decision-maker chooses an aspect; any alternatives without that aspect are eliminated. The decision-maker repeats this process with as many aspects as needed until there remains only one alternative[10]

Preference Trees: In 1979 Amos Tversky and Shmuel Sattach updated the elimination by aspects technique by presenting a more ordered and structured way of comparing the available alternatives. This technique compared the alternatives by presenting the aspects in a decided and sequential order. It became a more hierarchical system in which the aspects are ordered from general to specific [11]

Acquiesce to a person in authority or an "expert", just following orders
Flipism: flipping a coin, cutting a deck of playing cards, and other random or coincidence methods
Prayer, tarot cards, astrology, augurs, revelation, or other forms of divination
Taking the most opposite action compared to the advice of mistrusted authorities (parents, police officers, partners ...)
Opportunity cost: calculating the opportunity cost of each options and decide the decision
Bureaucratic: set up criteria for automated decisions
Political: negotiate choices among interest groups

An emerging need of using software for decision making process is happening for individuals and businesses. This happens due to the complexity of many decions that have to be made today, and require to think of different stakeholders, categories, elements, or factors that impact high-level decisions.

[edit] Decision making stages

Developed by B. Aubrey Fisher, there are four stages that should be involved in all group decision making. These stages, or sometimes called phases, are important for the decision making process to begin

Orientation stage - This phase is where members meet for the first time and start to get to know each other.

Conflict stage - Once group members become familiar with each other, disputes, little fights and arguments occur. Group members eventually work it out.

Emergence stage - The group begins to clear up vague opinions by talking about them.

Reinforcement stage - Members finally make a decision, while justifying themselves that it was the right decision.

It is said that critical norms in a group improves the quality of decisions, while the majority of opinions (called consensus norms) do not. This is due to collaboration between one another, and when group members get used to, and familiar with, each other, they will tend to argue and create more of a dispute to agree upon one decision. This does not mean that all group members fully agree - they may not want argue further just to be liked by other group members or to "fit in".[12]

[edit] Decision making steps

Each step in the decision making process may include social, cognitive and cultural obstacles to successfully negotiating dilemmas. It has been suggested that becoming more aware of these obstacles allows one to better anticipate and overcome them.[13] The Arkansas Program presents eight stages of moral decision making based on the work of James Rest:

Establishing community: creating and nurturing the relationships, norms, and procedures that will influence how problems are understood and communicated. This stage takes place prior to and during a moral dilemma
Perception: recognizing that a problem exists
Interpretation: identifying competing explanations for the problem, and evaluating the drivers behind those interpretations
Judgment: sifting through various possible actions or responses and determining which is more justifiable
Motivation: examining the competing commitments which may distract from a more moral course of action and then prioritizing and committing to moral values over other personal, institutional or social values
Action: following through with action that supports the more justified decision. Integrity is supported by the ability to overcome distractions and obstacles, developing implementing skills, and ego strength
Reflection in action
Reflection on action

Other decision making processes have also been proposed. One such process, proposed by Dr. Pam Brown of Singleton Hospital in Swansea, Wales, breaks decision making down into seven steps:[14]

Outline your goal and outcome.
Gather data.
Develop alternatives (i.e., brainstorming)
List pros and cons of each alternative.
Make the decision.
Immediately take action to implement it.
Learn from and reflect on the decision.

[edit] Cognitive and personal biases

Biases can creep into our decision making processes. Many different people have made a decision about the same question (e.g. "Should I have a doctor look at this troubling breast cancer symptom I've discovered?" "Why did I ignore the evidence that the project was going over budget?") and then craft potential cognitive interventions aimed at improving decision making outcomes.

Here is a list of commonly debated cognitive biases.

Selective search for evidence (a.k.a. Confirmation bias in psychology) (Scott Plous, 1993) - We tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions. Individuals who are highly defensive in this manner show significantly greater left prefrontal cortex activity as measured by EEG than do less defensive individuals.[15]
Premature termination of search for evidence - We tend to accept the first alternative that looks like it might work.
Inertia - Unwillingness to change thought patterns that we have used in the past in the face of new circumstances.
Selective perception - We actively screen-out information that we do not think is important. (See prejudice.) In one demonstration of this effect, discounting of arguments with which one disagrees (by judging them as untrue or irrelevant) was decreased by selective activation of right prefrontal cortex.[16]
Wishful thinking or optimism bias - We tend to want to see things in a positive light and this can distort our perception and thinking.[17]
Choice-supportive bias occurs when we distort our memories of chosen and rejected options to make the chosen options seem more attractive.
Recency - We tend to place more attention on more recent information and either ignore or forget more distant information. (See semantic priming.) The opposite effect in the first set of data or other information is termed Primacy effect (Plous, 1993).
Repetition bias - A willingness to believe what we have been told most often and by the greatest number of different sources.
Anchoring and adjustment - Decisions are unduly influenced by initial information that shapes our view of subsequent information.
Group think - peer pressure to conform to the opinions held by the group.
Source credibility bias - We reject something if we have a bias against the person, organization, or group to which the person belongs: We are inclined to accept a statement by someone we like. (See prejudice.)
Incremental decision making and escalating commitment - We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision making. (See slippery slope.)
Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we attribute our failures to bad luck and external factors. We attribute other's success to good luck, and their failures to their mistakes.
Role fulfillment (Self-fulfilling prophecy) - We conform to the decision making expectations that others have of someone in our position.
Underestimating uncertainty and the illusion of control - We tend to underestimate future uncertainty because we tend to believe we have more control over events than we really do. We believe we have control to minimize potential problems in our decisions.
Framing bias is best avoided by using numeracy with absolute measures of efficacy.[18]

Reference class forecasting was developed to eliminate or reduce cognitive biases in decision making.

[edit] Post-decision analysis

Evaluation and analysis of past decisions is complementary to decision making; see also mental accounting.

[edit] Cognitive styles

[edit] Influence of Myers-Briggs type

According to behavioralist Isabel Briggs Myers, a person's decision making process depends to a significant degree on their cognitive style.[19] Myers developed a set of four bi-polar dimensions, called the Myers-Briggs Type Indicator (MBTI). The terminal points on these dimensions are: thinking and feeling; extroversion and introversion; judgment and perception; and sensing and intuition. She claimed that a person's decision making style correlates well with how they score on these four dimensions. For example, someone who scored near the thinking, extroversion, sensing, and judgment ends of the dimensions would tend to have a logical, analytical, objective, critical, and empirical decision making style. However, some[who?] psychologists say that the MBTI lacks reliability and validity and is poorly constructed.

Other studies suggest that these national or cross-cultural differences exist across entire societies. For example, Maris Martinsons has found that American, Japanese and Chinese business leaders each exhibit a distinctive national style of decision making.[20]

[edit] Optimizing vs. satisficing

Herbert A. Simon coined the phrase "bounded rationality" to express the idea that human decision making is limited by available information, available time, and the information-processing ability of the mind. Simon also defined two cognitive styles: maximizers try to make an optimal decision, whereas satisficers simply try to find a solution that is "good enough". Maximizers tend to take longer making decisions due to the need to maximize performance across all variables and make tradeoffs carefully; they also tend to more often regret their decisions (perhaps because they are more able than satisficers to recognise that a decision turned out to be sub-optimal).[21]

[edit] Combinatoral vs. positional

Styles and methods of decision making were elaborated by the founder of Predispositioning Theory, Aron Katsenelinboigen. In his analysis on styles and methods Katsenelinboigen referred to the game of chess, saying that "chess does disclose various methods of operation, notably the creation of predisposition-methods which may be applicable to other, more complex systems."[22]

In his book Katsenelinboigen states that apart from the methods (reactive and selective) and sub-methods (randomization, predispositioning, programming), there are two major styles - positional and combinational. Both styles are utilized in the game of chess. According to Katsenelinboigen, the two styles reflect two basic approaches to the uncertainty: deterministic (combinational style) and indeterministic (positional style). Katsenelinboigen's definition of the two styles are the following.

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The combinational style is characterized by

a very narrow, clearly defined, primarily material goal, and
a program that links the initial position with the final outcome.

In defining the combinational style in chess, Katsenelinboigen writes:

The combinational style features a clearly formulated limited objective, namely the capture of material (the main constituent element of a chess position). The objective is implemented via a well-defined, and in some cases, unique sequence of moves aimed at reaching the set goal. As a rule, this sequence leaves no options for the opponent. Finding a combinational objective allows the player to focus all his energies on efficient execution, that is, the player's analysis may be limited to the pieces directly partaking in the combination. This approach is the crux of the combination and the combinational style of play.[22]

The positional style is distinguished by

a positional goal and
a formation of semi-complete linkages between the initial step and final outcome.

"Unlike the combinational player, the positional player is occupied, first and foremost, with the elaboration of the position that will allow him to develop in the unknown future. In playing the positional style, the player must evaluate relational and material parameters as independent variables. ... The positional style gives the player the opportunity to develop a position until it becomes pregnant with a combination. However, the combination is not the final goal of the positional player-it helps him to achieve the desirable, keeping in mind a predisposition for the future development. The Pyrrhic victory is the best example of one's inability to think positionally."[23]

The positional style serves to

a) create a predisposition to the future development of the position;

b) induce the environment in a certain way;

c) absorb an unexpected outcome in one's favor;

d) avoid the negative aspects of unexpected outcomes.

Katsenelinboigen writes:

"As the game progressed and defense became more sophisticated the combinational style of play declined. ... The positional style of chess does not eliminate the combinational one with its attempt to see the entire program of action in advance. The positional style merely prepares the transformation to a combination when the latter becomes feasible."[24]

[edit] Neuroscience perspective

The anterior cingulate cortex (ACC), orbitofrontal cortex (and the overlapping ventromedial prefrontal cortex) are brain regions involved in decision making processes. A recent neuroimaging study[25] found distinctive patterns of neural activation in these regions depending on whether decisions were made on the basis of personal volition or following directions from someone else. Patients with damage to the ventromedial prefrontal cortex have difficulty making advantageous decisions.[26]

A recent study[27] of a Two-alternative forced choice task involving Rhesus monkeys found that neurons in the parietal cortex not only represent the formation of a decision but also signal the degree of certainty (or "confidence") associated with the decision. Another recent study[28] found that lesions to the ACC in the macaque resulted in impaired decision making in the long run of reinforcement guided tasks suggesting that the ACC may be involved in evaluating past reinforcement information and guiding future action.

Emotion appears to aid the decision making process: Decision making often occurs in the face of uncertainty about whether one's choices will lead to benefit or harm (see also Risk). The somatic-marker hypothesis is a neurobiological theory of how decisions are made in the face of uncertain outcome. This theory holds that such decisions are aided by emotions, in the form of bodily states, that are elicited during the deliberation of future consequences and that mark different options for behavior as being advantageous or disadvantageous. This process involves an interplay between neural systems that elicit emotional/bodily states and neural systems that map these emotional/bodily states.[29]

Although it is unclear whether the studies generalize to all processing, subconscious processes have been implicated in the initiation of conscious volitional movements. See the Neuroscience of free will.

[edit] See also

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