Models of decision making

Rational model. The rational decision-making process suggests we follow decision-making steps in a methodical way. One, identify the decision. Two, gather information. Three, identify alternatives. Four, evaluate alternatives. Choose solution. Five, take action. And six, evaluate outcome. It could be suggested this is the most common approach to decision-making and planning in a firm.

Bounded rationality or behavioural model. Bounded rationality suggests the decisions are rational, however bounded by the ability of the human decision-maker. It suggests knowledge and capabilities are limited and imperfect. Interestingly, bounded rationality has some consensus in strategy knowledge.

Three specific limitations are suggested. One, decision-makers do not have all available information and answers so must research and examine as much information as they can access. Two, decision-makers have limited analytical ability and require support from collaboration, assessment, and technology. Three, decision-makers are time-poor and make decisions in the time allowed.