Even the smallest decision can change your life forever. Whether it’s making a choice about the next meal you’re going to order in or traveling amidst a global pandemic, we make decisions every day. In a professional context, decisions are the beating heart of business solutions and advancement. Employees across all hierarchies or managerial levels need to make important decisions that can make or break an organization.

Read on to see why decision-making is one of the most important skills of a professional. Let’s also take a look at various decision theories that study the types of decisions we make at work.

  1. Understanding Decision Theory Approach In Management

  2. Exploring Different Types Of Decision Theories

Understanding Decision Theory Approach In Management

Decision making theory is a managerial approach that allows managers to take effective decisions for greater business outcomes. It’s an interdisciplinary approach that helps arrive at decisions in the most advantageous way. Decision theories bring together multiple disciplines, including mathematics, psychology, statistics and philosophy, to analyze decision-making processes.

Decision-making is an important aspect of an organization. It helps in problem-solving and arriving at solutions that lead to business growth and increased profitability. Decisions are driven by the people, either through individual or group participation. Decision theories help study people’s choices through a set of concepts, principles, tools and techniques. They allow decision makers to determine the best course of action among a set of alternatives.

Let’s take a look at why different decision theories are important in corporate management:

  • Helps pick the best possible alternative among various choices

  • Helps calculate risks and analyze possible solutions to mitigate risks

  • Helps improve efficiency and achieve organizational goals in lesser time

When individuals, especially managers and team leaders, make rational choices and logical decisions, it reduces risks and positively influences organizational growth.

Exploring Different Types Of Decision Theories

Different decision theories have emerged over time and each is instrumental in the way we make choices and arrive at decisions. Let’s take a look at them in detail.

  1. Bounded Rationality Decision Making Theory

Herbert A. Simon is an American economist and popular scientist who was known for his multiple contributions in the fields of psychology, statistics and mathematics, among others. He argued that making a decision is making a choice between alternative courses of action. It can even mean choosing between action and non-action. In contrast to classical theorists, Simon suggests that there is never one best course of action or decision. It’s because one can’t have complete information about something, therefore, there will always be a better course of action or decision. This is why humans settle for a ‘good enough’ decision instead of seeking the best possible decision. Therefore, bounded rationality prevents us from seeking out fully rational decisions.

  1. Vroom-Yetton Decision Making Theory

One of the most popular decision theories, the Vroom-Yetton Model was developed by Victor Vroom, a business management professor, in collaboration with another management professor, Philip Yetton. It suggests that there isn’t any one perfect process to make decisions. Instead, your situation determines what the best process should be. It uses a ‘yes or no’ approach, where asking relevant questions can help you reach decisions. For example: is teamwork important for the decision? One of the biggest strengths of this decision theory approach in management is its flexibility. Anyone at any organizational level can use it to make decisions.

  1. Intuitive Decision Making Theory

Did you know that even when you’re making a decision intuitively, you’re following a decision-making approach? Even though intuitive decisions occur in your mind instantly, there is actually a pattern recognition in place. Researchers have found that intuitive decisions are effective when you have a lot of experience in that particular area. However, going with your gut isn’t always the best way as it may be ineffective in unfamiliar situations.

No matter what type of decision you make, effective decision-making is a much-needed fundamental skill in your personal and professional life. Harappa’s Making Decisions course will equip you with frameworks to process, reflect and include multiple perspectives for informed decision-making. You’ll seek multiple viewpoints on problems before making final decisions with the Good Decisions Process framework that will help you scrutinize situations. Enroll with Harappa for good decision-making!


Explore Harappa Diaries to learn more about topics such as Decision MakingDecision Making Theory By SimonDecision Tree Models and Examples Of Decision Trees to classify problems and solve them efficiently.

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