Decision making models are the methods that help people like managers, CEOs, consultants and other members of the organization to solve any type of problem and find the best solution to the problem. These methods will tell you what you need the most to eliminate your problem and remove the confusions that arises in your mind while solving any problem.
Decision making models are of three types:-
- Classical Model
- Administrative Model
- Herbert Simon’s Model
1) Classical Model
Classical model is very old and well known model in any kind of decision making. Classical Model is also known as rational model Because in this method the decision maker takes the decision without any biases. It is a prescriptive model because in this the decision maker only suggests the best solution to the problem.
In the classical model, the decision maker explores all possible ways of solving a problem and also notices the effect of each possible method and then logically select the best option to solve the problem without any biases.
The classical model is based on the following four most important assumptions:
- Problem should be clearly defined
- Eliminate all those things that are unpredictable
- Access to all information related to the problem
- The solution must be based on reasonable logic and fairness
When a decision maker seeks to solve any problem through classical model, he should always keep in mind the above four points to get the full benefit of this method and find the best solution to the problem.
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2) Administrative model
Administrative model is also known as bounded rationality model Because here in this model the decision maker has incomplete information about the problem.
The only difference between administrative model and classical model is that administrative model does not contain complete information about the problem and the decision maker has to make his/her decisions under certain restrictions. In this, the person has only limited information and limited guidelines about the problem and on the basis of that he has to make a decision.
In this method, the decision maker tries to make satisfactory decisions which can satisfy everyone in the organization. Such decision-making models are used to find solutions to the problem where the problem is related to more than 2 different departments in the organization. Basically it is used to find solutions to complex problems in organizations.
This problem also has four most important assumptions:
- Problem solving is not towards the goal of the organization as this model is used to satisfy.
- Not fully aware of all possible options
- The goals of various elements of the organization such as employees, customers, shareholders, etc. limit decisions and the result is a settlement solution.
- Not able to predict future outcomes
3) Herbert Simon’s Model
Herbert Simon was also a great researcher and Nobel laureate. This model of decision making was given by him hence it is known as Herbert Simon’s model.
According to this model a person goes through three stages while solving a problem.
Let’s understand all three stages one by one
1) Intelligence– Intelligence refers to the amount of internal and external information a person has about the problem. The more a person has the information related to the problem, the more he will be able to understand the problem better and will be able to take the right decision.
2) Design– Design refers to finding different types of solutions to eliminate the problem and evaluating all the solutions to find the best solution.
3) Choice– Choice refers to choosing the best solution among different types of solutions and then implementing and monitoring the solution to eliminate the problem.
Planning process in management
Before starting any new thing every organization goes through a process which is known as planning process. Planning is a type of thinking in which we think everything about the task we want to undertake. There are seven steps under planning process. Each step has its own importance and plays a very important role in the planning of organization because After the implementation of a plan that plan was followed for many years.
1) Setting up objective
This is the first stage of the planning process in which the organizations discuss their main objective behind starting their new thing. For example- An organization decided to distribute its product pamphlet among the people. The motive behind distribution is to increase sales.
2) Developing premises
The meaning of the premises is our perception. In this stage, the organization makes many assumptions about things that can happen in the future which include both good things and bad things. It is one of the most important stages of the planning process. The organization makes many assumptions regarding the future to know whether the objective they have set will be possible or not. If not, the organization drops that plan and starts anew. If yes then this plan continues.
For example- The organization decided to distribute its product (toys) pamphlet in an area where there are no children. Everyone is above 12. Then there is very little chance that the company will be able to achieve its objective (increase in sales) if it distributes its pamphlets in that area.
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3) Listing various alternatives
In this phase, the organization makes different choices which are helpful in achieving the objective of the organization which it has made in its earlier phase. For example- An organization wants to increase its sales. In order to achieve his objective of increasing the sales, he may enlist the following various options:
- bring down prices
- issue of free gift vouchers
- discount on products
- Give something free with product like buy 1 get 1 free
4) Evaluation of various alternatives
In this phase, the organization evaluates all the options and examines all its options one by one to see which option will give results sooner at a lower cost as compared to other alternatives. For example- After the organization has listed out the various options (in step 3), now, it will study each option in depth and find out which option will give how much benefit to the organization.
5) Selecting an alternative
After studying all the options in depth, the organization selects the best option which will help the organization to achieve the objective that it wants to achieve. For example- According to the organization, giving something free with the product, is the best alternative and this alternative will help the organization to achieve its objective quicker and faster, that’s why organization will choose this alternative and will continue its work over this alternative and leave the rest of the other options.
6) Implementation of Selected alternative
After it is finished with the selection of an option, the organization starts working on actualizing the selection option and implementing the option in the organization. At this point, the organization will make all the decisions that are appropriate for this option. For example- The organization has opted to give some freebies along with the product to its customer. Now the organization will convert this option into reality and will also provide free things along with the product to its customers.
7) Follow up
After the implementation of the plan, the organization continues the option and checks the implemented option as time goes by and if necessary makes some changes as per the situation. For example- The free things provided by the organization to its customers are getting very old and the customers also do not like to take that thing. So in this case the organization can replace the old free thing with a new one.