Rational Decision Making: Definition, Model Process, Importance, Example

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Rational Decision Making

Rational decision-making in choosing the best solution from multiple alternatives solution and answers. it is a process step by step that helps us identify a problem and pick the best alternative solution.

Here we have shared a complete detailed article on rational decision marking and models, processes, and importance in organizations.

What is Rational Decision Making?

Rational decision-making is the opposite of intuitive decision-making.

The rational model of decision making is a model where individuals use facts and information, analysis, and a step-by-step process to come to a decision.

Rational decision-making is known as a more advanced type of decision-making model.

Rational Decision Making Meaning

This is assume that the optimized decision-making is rational and an individual who makes consistent, maximum choices with specific constraints. It is an important skill to structure or reasonable thought process to act of deciding which one is best.

Any business organization want to take decision effectively and efficiently to optimize the profit of the organization

Definition of Rational Decision Making

Rational Decision Making can be defined as a more advanced type of decision-making process by doing research and logical evaluation, selecting the best choice based on reason and facts.

This is very important when making a crucial decision that can benefit from the process and expertise.

  • Rational decision-making is a process that helps us to identify the problem and pick the best alternative solution.
  • Objective data, logic, and analysis instead of subjectivity and intuition to help solve a problem or achieve a goal.

Bounded Rationality of Decision Making

Bounded rationality is another method by which manager makes rational decisions. Bounded rationality suggests that managers seek alternatives until they find one that is satisfactory, not optimal.

Bounded Rationality can be defined as the ability of decision-makers to be rationally limited by numerous constraints, such as complexity, time, and cost, and their cognitive capacity, values, skills, and unconscious reflexes are known as bounded rationality.

Concept of Rational Decision Making

Two basic concepts of goodness are monism and pluralism.

  • Monism
  • Pluralism

Monism Philosophy

Monists believe that only one thing is intrinsically good, and pluralists believe that two or more things are intrinsically good.

Monists are often exemplified by hedonism—that one‘s pleasure is the ultimate intrinsic good or that the moral end, or goodness, is the greatest balance of pleasure over pain.

Moral philosophers describe those who believe that more pleasure is better as quantitative hedonists and those who believe that it is possible to get too much of a good thing (such as pleasure) as qualitative hedonists.

Pluralists Philosophy

Pluralists often referred to as non-hedonists, take the opposite position that no one thing is intrinsically good.

  • Goodness theories typically focus on the result of actions and the goodness or happiness created by them.
  • Obligation theories emphasize the means and motives by which actions are justified.

Process of Rational Decision Making

The rational decision-making process is a series of steps, which starts from identifying the problem, processing information, and alternative, and ending with selecting the best alternative

  • Step 1: Identify the problem
  • Step 2: Gather relevant information
  • Step 3: Identify the alternative
  • Step 4: Weigh the evidence (Comparing alternatives)
  • Step 5: Choose among alternative
  • Step 6: Take action
  • Step 7: Review your decision

Step 1: Identify the problem

The first step is to find out your specific problem and to prove your problem you have to evidence for it.

Step 2: Gather relevant information

once you identify the problem, it’s time to collect the information from relevant sources. see where your organization has to do good and poor in areas related to your decision.

Step 3: Identify the alternative

With the relevant sources of information identify the best possible solution to your problem. The three common approaches choosing the best alternative experience, experimentation, and research and analysis.

Step 4: Weigh the evidence

In this step, you will need to evaluate for feasibility, acceptability and desirability to know which alternative is best.

Step 5: Choose among alternative

once you have compared all the evidence you have ready to choose the best alternative which is suited for your situation. The manager must be sure all the information available is bought to bear on the problem.

Step 6: Take action Rational Decision Making

Now, it is time to take action and implement your plan, your plan should be tangible and achievable then you can assign tasks to your organization.

Make sure your plan is effective and achievable, so be prepared to address any questions or concerns that may arise from the side of your subordinate.

Step 7: Review your decision

Evaluate your decision for effectiveness. This step gives you an opportunity to think about your decision and learn from it. you learn from your mistakes in the future you begin the decision-making process again.

Rational decision-making model

  • Choose objective
  • Select alternative
  • Outline impact
  • Determine criteria
  • Apply scenarios
  • Implemented preferred options
  • Evaluate consequences

Importance of Rational decision making

Rational decision-making is for making effective decisions and brings a structured procedure to the act of deciding, organization are faced with decision-making procedures every day.

It is a systematic process of decision making in which managers define the problem, evaluate alternatives, choose the best alternative, take action and then review the decision.

  • Better utilization of resources
  • Facing problems and challenges
  • Business growth
  • Achieving objectives
  • Increase efficiency
  • Facilitates innovation
  • Motivates employees

Better Utilization of Resources

The lean organization often becomes more efficient naturally. as a result of eliminating waste and spending much more time on activities that are value-added. optimization of resources in a better way.

Facing problems and challenges

some of the decisions are very challenging and some take much time. Rational decision-making is a process that helps us to identify the problem and pick the best alternative solution.

Business growth Rational Decision Making

Rational decision-making influences business growth that occurs when business owners, employees, and influence the success of a company.

Business growth can be achieved through sales targets on time and maximizing revenue of the business with greater product sales or service by increasing profitability.

Achieving objectives

An objective is a specific commitment to achieve a measurable result within a given period of time and the objective must be clearly shown what the company wants to achieve and when it wants to achieve it.

Increase efficiency

Increased efficiency in work plays a major role in the growth of the organization. Ability to complete a job with a minimum expenditure of time and effort by the ratio of the work done or energy developed by a machine, or engine.

Facilitates innovation

Innovation is the introduction of an idea, a method for the creation of something experimentation, innovation is more important for industry time small changes are good for the organization.

Motivates employees

Motivation is much important for employees it is work as positive energy for the organization. Motivated employees don’t have to explain how to get things done, they take initiative, and take on additional responsibilities. It creates a positive atmosphere within the organization.

Examples of Rational Decision Making

For example, the HR Manager sees that employee turnover has increased by 10 percent. The HR manager can increase incentives and other benefits or change HR policy standards if required.

  • Increasing non-monetary benefits may not be feasible.
  • Increasing incentives and changing hiring standards and policies may satisfy all conditions.
  • Changing hiring standards will take an extended period of time to cut turnover, so increase wages.
  • The Human Resource Manager may need permission from corporate headquarters.
  • The human resource department establishes a new wage structure and improved policies that employees were demanding.
  • The HR manager notes that six months later, turnover dropped to its previous level.

Points to be noted in this example is that the HR Manager first identifies the problem and then gathers facts and information about the problem.

Once the manager is sure about the problem then he identifies the available alternatives and compares their effectiveness with the problem.

Next, he chooses the best alternative and takes action to implement the rational decision which is purely based on factual information.

And at last, he reviews his decision and measures the result on a periodic basis.