Business Decision Making Process: Rational and Intuitive

The business decision-making process doesn’t always follow a standardized methodology or a rigidly and precisely modeled process.

This methodological inconsistency (and, therefore, process) occurs at an increasing rate, as the hierarchical level of the decision maker increases.

And it’s easy to understand why.

Every person who must make a decision, whether in an organization or their personal life, takes two aspects into consideration:

  • Rational and analytical aspects
  • Emotion and personal temperament aspects

We can’t forget, as well, the well-known aspect of intuition, which is not a bias of emotion, but an aspect that some people know how to use very well to get great results and others, well, not so much …

By taking these two aspects into account, the person who is involved in a business decision-making process is still pressured by a third factor: Time.

It’s as the old saying goes:

If you don’t make any decisions, you’ve already made one, and it’s wrong.”

Therefore, as the hierarchical level increases, the personality characteristics of a leader, their self-confidence, and experience, can lead them to lean more towards the emotional and temperamental aspects, mixed with intuition. It’s especially true if they don’t have enough time to analyze the information, or even to receive it from lower levels or the systems that should provide them with it.

In this context, the 4 personality types (the MBTI personality test model developed during World War II extends to 16 types) often strongly influence the business decision making process.

Personality types:

  • Analytical: Low assertiveness and low emotion
  • Pragmatic: Assertive and controlled
  • Integrator: Emotional, with low assertiveness
  • Expressive: Assertive and emotive

There is no ideal personality style for the decision maker. It depends on the positioning, values, culture and even the period that the organization is going through.

That is why more and more organizations seek to improve the modeling of their intelligence and leadership selection processes, in search of the best performance in the two fundamental factors for organizational decision making:

  • Leaders that are prepared to make risky decisions based on emotional and personality factors with responsibility and caution.
  • Information systems that provide the greatest agility, reliability, and precision in assisting the business decision-making process.

At the other end of the hierarchical chain are business rules. Those standardized procedures in process flows that define the sequence of activities by means of simple rules.

The lower the hierarchical level, the more rules should be involved in the business decision-making process.

To understand how this works a bit better, let’s take a look at an author who has studied the business decision-making process, Herbert Simon, and how he structured his analysis on this topic.

The business decision making process according to Herbert Simon

According to this Nobel Prize Winner and professor at Carnegie Mellon University, the business decision-making process has three phases:

  1. Prospecting: An analysis of the problem.
  2. Conception: The creation of solutions.
  3. Decision: The judgment and choice of one of the solutions.

Simon considers that the rational aspect is limited to maximize the choice of solution. What should be sought is not the ideal solution, but the most satisfactory. This emphasizes, in a way, the need to take into account the emotional aspect of organizational decision making.

Also, Simon classifies business decisions into 3 types:

  1. Scheduled decisions: Repetitive and routine, which can be the target of business process automation.
  2. Unscheduled decisions: Where the decision maker should use his judgment, intuition, and creativity.
  3. Semi-scheduled decisions: A mix of the two. Where there’s support from information systems, as well as the decisionmaker’s judgment, experience, and understanding of the context.

Whatever the type of business decision, the fact is, that Dashboards can help define business rules or provide the necessary information for decision-makers. See on the video below how it works:

Also, established techniques such as the SWOT analysis, the Ishikawa diagram, the BCG Matrix, and the Eisenhower Matrix can assist leaders in the business decision making process.

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