Decision-Making Models

Decision-Making Models

There are three types which managers use to make decision: classical model, administrative model, and political model.

The classical model, which is considered to be normative is based on economic assumptions, it defines how a decision maker should make decisions.
The value of classical model is its ability to help decision makers be more rational. It's most valuable when applied to programmed decisions and to decisions characterized by certainty or risk, because in classical model, relevant information is available and probabilities can be calculated.
As the growth of quantitative decision techniques, more and more companies use computer system to reduce costs, increase processing time, and improve cash flow, which has expanded the use of classical approach.
To understand this concept better, NBC television network and Southwest airlines are good examples, they use a computer-based system to find a more efficient way to making decisions, and of course, maximum their profit.

Administrative model describes how managers actually make decisions in difficult
Situations. It's the quest for a more realistic description of organization decision making produced a variation. This model sees decision makers as people with varying degrees of motivation who are besieged by demands but have little time to make decisions and thus seek shortcuts to find acceptable solutions. Under the administrative model, a decision maker does not try to optimize but instead satisfices-treats objectives as loose constraints that can tighten if there are many acceptable alternatives that fulfill those constraints. While optimization would require choosing the alternative with the highest value, satisficing requires finding the first alternative with an acceptable value, that is, an alternative with a value above a minimally acceptable level on a given constraint.
Herbert A. Simon proposed two concepts that were instrumental in shaping the administrative model: bounded rationality and...
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