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Using both head and heart in managerial decision making.

The work of a manager has been described as one decision after another. To introduce a new product or not, to open for business on Sunday or not, to hire this person or another -- these and a myriad of other decisions, complex and simple, important and routine, are the core and substance of a manager's job. Some of the decisions managers must make are highly structured, deliberative and quantitative, others are ill-defined, loosely structured and qualitative. Still others involve subjective preferences and aversions.

Needing and wanting to make good decisions in all these areas, managers generally try to use a single decision-making process, a textbook approach that is best described by the words rational, logical and analytical. Managers seem to believe that to the extent their decisions are rational they contribute directly to the objectives of the organization; and to the extent their decisions deviate from the rational model they detract from the organization's objectives. Although many new systems and techniques have been developed to make decisions both more simple and more rational, they are basically just tools -- they do not remove the risk from decision making nor do they eliminate the need for a judgment. When all the available information has been considered and all the known alternatives have been evaluated, there still remains the need for a decision to be made. Whether it is made by a single person or a group, it has been contended that it is often a tortuous process.

One of the reasons why the making of decisions is such a tortuous process for managers is the credibility gap that exists in the way they approach decisions. A sense of disbelief occurs when managers purport to make all decisions using the rational model while most observers and participants know that personalities and politics play a significant, if not overriding, role. Where does the error lie? In the management attitude that all decisions must be rational and impersonal? In the unwillingness of managers to admit that many decisions cannot and need not be based on detailed reasoning and quantitative analysis?

Theories of organization behavior and management range on a continuum from prescriptive to descriptive. The theory of decision making is mostly prescriptive and offers the rational model as its mainstay. Because of the many myths and taboos associated with any discussion of decision making, there has inevitably resulted an excessive emphasis on the rational model. While the need to help managers make better decisions perhaps justifies the emphasis, there is a persistent need to address this imbalance, both in research and teaching. This imbalance will not be corrected simply by pointing out the limitations and constraints of the rational model; what is needed is a better understanding of how decisions are actually made, i.e., the descriptive theories.

Domains of decision making

A necessary first step in correcting the imbalance of emphasis on the rational model is a recognition of the semantic difficulties associated with the labels used to identify the various domains of decision making. One of these, the rational model, is firmly established in the literature and has its adherents in all areas of organizational activity. Because the identity of the two other domains has been established by contrasting them with the rational domain, they have been labeled the nonrational (intuitive, experience-based) and the irrational (personalized, psychological). Cognitive definitions and understandings of these three terms -- rational, nonrational and irrational -- vary widely. Not only do they invite varied cognitive definitions, they also elicit strong emotional responses. A definition used by one theorist is invariably disputed by a second theorist from a different discipline or theoretical persuasion.

Writers in the disciplines of economics and statistics, for example, judge a decision to be rational if the decision maker evaluated all relevant alternatives and chose the one that maximized the satisfaction or utility of the decision maker. Rational, in this domain, refers both to a process (analysis) and to a goal (maximization). The efficacy of this model has been questioned on both informational and motivational grounds. Decision makers, according to H.A. Simon in Administrative Behavior, have neither the time nor the ability to analyze all possible alternatives. Because of their limited information-processing ability, decision makers do not -- they cannot -- maximize. Instead, the analysis is made only to the point of producing a "good-enough" decision. Assuming the validity of Simon's argument, does not the limitation of imperfect information and the substitution of satisfying for maximizing as a goal cause the rational domain to seem really less than rational?

The behaviorists provide the most persuasive answer to this question. The essential element in determining whether a decision or behavior is rational is: Did the decision maker have a conscious goal and did the decision maker behave in ways that had the promise of reaching the goal? Whether the decision was a result of analysis or one of the descriptive processes does not add to or detract from the rationality of the decision.

In the intuitive domain, decisions are based upon experience and recognition. They can be made intuitively because of the limitations of the analytical method; they can be made instinctively because the consequences are relatively unimportant or the skills involved in making intuitive decisions were acquired under conditions that allowed the decision maker to test and improve their adequacy. Because the decision is made without the benefit of systematic analysis of relevant alternatives, however, this domain has unfortunately been labeled nonrational -- a label that invites objections from behaviorists. Decision making is nonrational, they counter, only when decision makers do not use their mental faculties to selectively pursue a chosen goal and also fail to comprehend the consequences of their decision. Although there is evidence of much behavior that fails to meet this test of rationality, it is self-evident that individuals are thinking and reasoning beings. A given individual cannot be labeled nonrational without intimate knowledge of his or her conceptualizations of the world and the meaning he or she gives to information.

The third and last domain cited by theorists TABULAR DATA OMITTED is one in which decisions are based on personal preferences and aversions. Feelings and wishes, with varying degrees of consciousness, influence the decision maker. Decisions in this area are not a result of analysis, although analysis might have been used in some way. Neither are decisions in this domain a result of intuition, although intuition might also have been present. Because decisions in this domain do not purposefully use the analytical approach of the rational domain and because they are unduly influenced by personal feelings and wishes, the domain has been labeled irrational. And, again, the behaviorists object. A decision is irrational, they argue, only when the decision maker lacks the ability or faculty to perceive, comprehend and reason. It is thus unwarranted for a decision to be called irrational simply because it has emotional elements. Again, being conscious of some goal or objective and the use of reasoning in pursuit of that goal are the only requirements for a decision to be called rational. Thus rational decisions can be made in either of the three domains and they can result from analysis, intuition or from expression of the decision maker's preferences and aversions.

The differences between these three domains are of both theoretical and practical importance. The analytical domain is prescriptive -- it provides a model for making decisions that intentionally maximizes sought-for consequences. The other two are descriptive -- they describe what managers actually do when, for whatever reasons, they depart from the rational model. But these three domains need not be viewed as discrete, with the rigorous formulation of the analytical model being irreconcilable with the behavioral explanations of the descriptive models.

Consideration of these domains of decision making can be facilitated by thinking of them as sides of an equilateral triangle with the inside of the triangle being the arena of decision making. While the decision maker might enter the arena from the analytical side, there is always the influence of the other two sides in the arena. Since rationality (the analytical side) is bounded, the vacuum in the prescriptive approach is necessarily filled with inputs or influence from the descriptive domains. Further, once in the arena, the decision maker can, consciously or unconsciously, move toward either of the other sides when the analytical model does not or cannot lead confidently to an acceptable decision. Any change in the applicability or attractiveness of one side always affects one or both of the other sides.

It would be difficult to determine whether a particular decision was made solely in one domain. To operate in the decision-making arena is to be subjected to influences from each of the three sides. While a person might consciously seek to use only the processes from the analytical domain, he is often prevented from doing so by the limitations of that domain and, further, by the interference of complex social and psychological forces. These may include emotions fueled by organizational and hierarchical pressures such as reward, recognition and status, as well as such private emotions as love, envy, fear and self-esteem. All of these forces must be reckoned with in the decision-making arena. Pretending they are not present or arguing that they do not interfere in the actual making of a decision is a foolhardy, undisciplined approach. Only by recognizing and accepting the possible convoluting influence of each upon the other can a decision maker be disciplined to follow a prescribed or chosen approach.

The lesson of Star Trek

To show how a decision maker can be influenced by the values and processes of different decision-making domains, consider a typical experience of Captain Kirk of the Starship Enterprise in the popular television program Star Trek. Each segment of the show presents Captain Kirk a dilemma, usually centered around people, equipment and their unique situation. Typically, each show is about some decision Captain Kirk must make. Just like on earth, problems are characterized by uncertainties and probabilities; information about the problem runs the gamut from too much to none at all. Typically, too, there are two or more ways of resolving the dilemma. Thus the stage is set for the drama to unfold.

Captain Kirk, perhaps more wisely than his earthly counterparts, has two advisors to assist him in making his decision. On the one hand there is Mr. Spock, the ship's science officer, who is half-Vulcan and half-Earthling. Mr. Spock is predictably and consistently analytical, logical, unemotional and computer-like in his thinking. He is also intentionally rational. On the other hand, there is Dr. McCoy, the warm and caring ship's surgeon, whose approach is always on the side of relationships, communication and the whole gamut of human emotions and responses. In the decision-making arena, Captain Kirk must reconcile and/or integrate the arguments of his two capable advisors in his own intuitive, heuristic way. Will his decision be based on fact (from the analysis domain) or feeling (from the psychological domain)? Will he listen to his head or to his heart? Or will he choose some balance of the two? In this situation, Captain Kirk personifies the intuitive decision maker. Characteristically, he is unable to describe how his decision was made; fortunately, he always makes a rational, goal-producing decision.

The discussion of the three domains of decision making in the previous pages is reflected in Table 1. Each of the domains is related to one of the Star Trek characters.

The case for intuition

It is a tenable argument that a large majority of managerial decisions are made in the intuitive domain where experience, insight, recognition and judgment assist the decision maker. Some claim that this style of decision making was characteristic of many of the early entrepreneurs who created America's large business organizations. In a survey of over 2,000 top executives, it was found that executives make frequent use of intuition in making decisions but do not always tell colleagues how they reach important conclusions. Other researchers are finding, however, that the use of intuition in corporate decision making has gained new respectability. More recently, it has been reported to what a great extent hunches (what has been called by R. Rowan "the Eureka factor") have been used by captains of industry. Theorists argue that if managers can effectively avoid overgeneralizing from past experience and accurately perceive how the key variables in a current, new decision problem are similar to or different from those in earlier situations, intuitive or experience-based decision making can be useful and effective. Further, it has been said that such intuitive decisions are made necessary because of the large number of decisions that confront managers daily and for which there are no analytical or "scientific-based" solutions available. It is more a case of having to rather than choosing to make an intuitive decision. In some cases, however, a manager will choose the intuitive approach. A manager might, for example, realize that the expense of developing an analytical solution may exceed its contribution to improved decision making.

Bruce Henderson of the Boston Consulting Group argues that many decisions are not as rational as managers like to believe, saying that "Intuition disguised as status, seniority and rank is the underlying normative mode of all business decisions." But, he says, this cannot be helped. "Too many decisions must be made too often. Data is expensive to collect, and often of uncertain quality or relevance. Analysis is laborious and often far too expensive even though imprecise or superficial." Both Henderson and the several theorists cited in the preceding paragraph would agree, most likely, that because intuition is used in making so many decisions, it is necessary for executives to have a good awareness and understanding of the psychological dynamics of intuitive decision making.

The most important thing that can be said about intuitive decision making from a psychological perspective is that intuition differs from feelings and wishes. It is an intellectual and cognitive process rather than an emotional expression. Intuition does not operate independently of analysis; rather intuition complements analysis when the latter is unable to lead the decision maker to an acceptable decision. Simon recognizes this by arguing, "Intuition and judgment -- at least good judgment -- are simply analyses frozen into habit and into the capacity for rapid response through recognition."

There are many decisions in which intuition and judgment have to substitute for analysis and facts. Also, decisions that hinge on conditions in the future must, of necessity, involve a lot of intuition. Albert Einstein once said there were times he felt he was right without knowing the reason. The kind of decisions Einstein had in mind can be the most creative decisions managers ever make, even though they tend to mistrust their judgment in those situations where the analytical method cannot be used. While managers would generally agree on the merits of the analytical model, they would also agree that they cannot always use it. Sometimes they have too much information and would like to consult Mr. Spock. Other times they have too little information and wish Dr. McCoy were on hand. Most managers, as Captain Kirk evidently does, use a blend of analysis and intuition. It is a case of being analytical when it is necessary and feasible, and having the courage to be intuitive when analysis is no longer feasible. When the decision problem demands it, managers must be able to respond, not intuitively per se, but with the intuition that is developed over many years of training and experience.

A precautionary note is offered before departing the intuitive domain. In spite of admitted wide usage and recognized effectiveness, intuitive decisions are subject to limitations. Each manager is a unique combination of values, assumptions, expectations, needs, skills and knowledge. These personal properties determine, for the individual manager, what is a decision problem, what are the factors causing the problem and what are feasible alternative solutions. Further, each manager's background is limited and not always perfectly matched to the needs of the current problem. For this reason, assumptions and premises from past experiences have to be tested and retested against the demands of new situations. Even when the assumptions and premises of the past are correct, incomplete knowledge about the new situation or faulty interpretation of that information can result in a faulty decision.

The case for personalized decisions

The president and CEO of a high-tech manufacturing firm was an invited speaker in my graduate organization behavior class. He was asked how he made the decision to locate his company in Augusta, Georgia. Apparently the class was expecting a very detailed and complex response. To their great surprise, he responded, "Where else can you play golf 360 days a year?" His obvious sincerity allayed any further discussion of his response.

Georgia Governor Joe Frank Harris, a tee-totaler, had just signed a bill allowing the sale of alcoholic beverages on Sunday in Underground Atlanta, an entertainment, restaurant and retail complex in downtown Atlanta. During his weekly news conference, when asked his personal feelings about the bill, he responded, "I have personal convictions I live by, but I don't let my personal convictions dictate one way or another (in acting on legislation)."

And now a personal experience. Several weeks ago, my daughter, who lives in Atlanta, called late one evening to tell me she had some orchids that I could have if I would come over the next morning to get them. She explained that she was unexpectedly leaving the next afternoon on an extended business trip and she had no one to care for the orchids while she was away. I reasoned that taking the necessary time away from work plus incurring the expense of driving 300 miles roundtrip just to get the orchids was not cost-effective. But when I reasoned that I would like to visit with her before she left, my decision to go seemed eminently rational to me.

In each of the above scenarios, the decision that was made was seen by the decision maker as a good decision. The CEO had a personal preference, which influenced his decision to locate in Augusta. He did not bother to consider the many other possible locations. He knew, undoubtedly, that it would be a nonproductive, frustrating task. Recognizing that other locations might be equal in terms of markets, availability and cost of labor, transportation, etc., his decision was made not as a result of analysis or intuition but as an expression of personal preference. Two conditions must be established to validate his reasoning. First, he must have had the discretionary authority or power to make the final decision, and, second, the decision would have had to be acceptable to the board of directors. Managers, particularly at the top, are seldom placed in authoritative, decision-making positions without some assurance that the managers' personal values conform to the values of the organization. As long as the manager is within the bounds of his discretionary authority, his decisions can be made in either of the three domains. Naturally, he is always accountable to the board for the consequences of his decisions.

Governor Harris was personally opposed to the alcohol-sales bill but claimed that he did not let his personal feelings enter into his decision to sign the bill. He was also influenced, no doubt, by the public's desires and expectations, which reflected Atlanta's need to increase the city's attractiveness to tourists. He could not find any legal or procedural flaw in the bill and knew that the only basis for vetoing the measure would be personal opposition. He knew, too, that there would be an adverse public reaction, especially in Atlanta. He signed the bill but washed his hands of any responsibility by claiming that the bill was an expression of public policy by the Legislature -- that he did not let his personal feelings influence his official behavior. Yet, in the previous six years of his two-term administration he had vetoed 56 bills plus one joint resolution of the Senate and House of Representatives. Were all these bills flawed or were they vetoed on some other basis, i.e., personal feelings?

In my case, I can see, in retrospect, that I had a need to be seen as logical. Driving to Atlanta for the orchids would violate this need, so I went to visit my daughter and she gave me some orchids while I was there. The thing that made the difference was substituting one goal for another. In this matter, two decisions were made. The first decision was to go to Atlanta, the second was to find a justification for the first decision. Would I have visited her at that time if the orchids were not involved? I will not answer that.

Summary and conclusions

While managers all agree on the merits of the analytical model of decision making, they are quick to point out that they cannot always use it. Sometimes they do not have the time or the needed information to make all their decisions according to the model. As long as the analytical model is bounded by the amount and kinds of information, the motivation of the decision maker, and the multiplicity and complexity of organizational goals, intuitive decision making will abound. While any decision-problem can be better understood through analysis, it still begs a decision. In making the decision it is not logical to refrain from intuitive, judgmental decision making when the limitations of logic and reasoning are reached. Intuition need not be distrusted simply because it does not have the sacrosanct quality of analysis. It is doubtful whether organizations will ever have (or desire) managers whose decision-making styles are as individualized as those of Mr. Spock and Dr. McCoy. Neither is it likely that individual managers will have the option of choosing between being analytical or intuitive. More likely, we will find managers using a mix of these two skills. For the effective manager, it is not a case of being either analytical or intuitive. It is, rather, a choice of using the analytical method when it is needed and feasible and having the courage to be intuitive when analysis is no longer feasible. As Fulton Oursler once said, "In making decisions, we must use the brains that God has given to us. But we must also use our hearts which He also gave us."

Charles R. Holloman, Ph.D., a behavioral consultant and a licensed marriage and family therapist, is the Grover C. Maxwell Professor Emeritus of organization behavior at Augusta College. Holloman has also taught at the Air Force Academy, the University of Maryland and Virginia Tech and is a retired Air Force officer. Holloman has earned degrees in sociology from the University of Northern Colorado and in industrial psychology from the University of Colorado. He received his doctorate in psychology and organization behavior from the University of Washington. His fields of primary interest and research are the determinants of individual and organizational effectiveness.

For further reading

Agor, W. H., "The logic of intuition: How top executives make important decisions," Organizational Dynamics, Volume 14, no. 3.

Bass, B. M., Organizational Decision Making, Homewood, IL: R. D. Irwin, 1983.

Feldman, J. and H. E. Kanter, "Organizational decision making," in J. G. March, ed., Handbook of Organizations, Chicago: Rand McNally, 1965.

"Gut feelings are still the basis for executive decisions," The Levinson Newsletter, July 13, 1988.

Harrison, E. F. The Managerial Decision-Making Process, Boston: Houghton-Mifflin, 1981.

Hinsie, L. E. and R. J. Campbell, Psychiatric Dictionary, New York: Oxford University Press, 1970.

Hogarth, R. M., Judgment and Choice, New York: John Wiley, 1987.

Janis, I. L. and L. Mann, Decision Making: A psychological analysis of conflict, choice, and commitment, New York: Free Press, 1977.

MacCrimmon, K. R. and R. N. Taylor, "Decision making and problem solving," in M. D. Dunnette, ed., Handbook of Industrial and Organizational Psychology, Chicago: Rand McNally, 1976.

Naisbitt, J. and P. Aburdene, Re-Inventing the Corporation, New York: Warner Books, 1985.

"Personal beliefs don't affect decisions, Harris Says," Augusta Chronicle, March 17, 1988.

Peters, T. J. and R. H. Waterman Jr, In Search of Excellence, New York: Harper and Row, 1982.

Richards, M. D. and P. S. Greenlaw, Management: Decisions and Behavior, Homewood, IL: R. D. Irwin, 1972.

Rowan, R., The Intuitive Manager, Boston: Little, Brown and Company, 1986.

Simon, H. A., Administrative Behavior, New York: Free Press, 1957.

Simon, H. A., "Making management decisions: The role of intuition and emotion, "Academy of Management Executive, 1987.
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Title Annotation:Managerial Behavior
Author:Holloman, Charles R.
Publication:Industrial Management
Date:Nov 1, 1992
Words:4068
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