What is rational decision making

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Rational decision making brings a structured or reasonable thought process to the act of deciding. The choice to decide rationally makes it possible to support the decision maker by making the knowledge involved with the choice open and specific. This can be very important when making high value decisions that can benefit from the help of tools, processes, or the knowledge of experts.

Characteristics of rational decision making

Choosing rationally is often characterized by the following:

• Decision making will follow a process or orderly path from problem to solution.
• There is a single best or optimal outcome. Rational decisions seek to optimize or maximize utility.
• The chosen solution will be in agreement with the preferences and beliefs of the decision maker.
• The rational choice will satisfy conditions of logical consistency and deductive completeness.
• Decision making will be objective, unbiased and based on facts.
• Information is gathered for analysis during the decision making process.
• Future consequences are considered for each decision alternative.
• Structured questions are used to promote a broad and deep analysis of the situation or problem requiring a solution.
• Risk and uncertainty are addressed with mathematically sound approaches.

In the ideal case, all rational decision makers would come to the same conclusion when presented with the same set of sufficient information for the decision being made. This would suggest that collaborative decision making will often employ a rational decision making process.

Problems and limitations with choosing rationally

Most of the issues and limitations associated with rational choice result from falling short of the ideal proscribed in the full rational decision making model. Here are three areas that generate much of the concern.

1. 
   Limits of human capabilities - The limits on our human ability to gather, process, and understand all the information needed to optimize a decision outcome make it impractical to meet the ideal except in very constrained or simple situations. We have limits in our ability to formulate as well as solve very complex problems. Our desire to optimize is also limited, and we will usually "saticfice", or be content with acceptable solutions when confronted with obstacles.
2. Limits on information and knowledge - The model assumes we should or can gather sufficient information in terms of quantity, quality, accuracy, and integrity. It also assumes that we have access to the required knowledge of the cause and effect relationships that are important to the evaluation of alternative solutions, particularly with respect to projecting future consequences.
3. Limits in time - Search for the optimum solution will generate a delay that could negatively impact the benefits of the chosen alternative. In essence, if the decision alternatives are not properly discounted for changes due to decision timing, the chosen alternative may not be optimum.

More on decision making models

As with any ideal, additional models have been developed to address the problems with realizing the full rational model. The Bounded Rationality model acknowledges our cognitive and environmental limits and suggests that we act rationally within these constraints. Many decision making theories are a result of looking at the consequences of bounded rationality.

Rational ignorance takes a similar approach to looking at the cost of gathering information. In this model, it is suggested that if the cost to acquire information exceeds the benefits that can be derived from the information, it is rational to remain ignorant. This aligns with our concept of using decision value to limit the decision effort, ensuring an appropriate return from using a rational decision making process (See planning decision making).

The benefits of rational choice

Within the limitations described above, choosing rationally can provide a number of benefits that include:

• Addressing complex decisions by breaking them down
• Characterizing decision problems and goals to ensure addressing all needs and desires
• Being aided by structured techniques, mathematics, and computers
• Ongoing improvement when codified in a process, procedure, or program
• A long list of decision making techniques and tools with proven usefulness
• A growing capability to analyze and access the information that can improve guidance based on the facts

While unable to meet the requirements of the full rational decision making model, this ideal serves as a valuable approximation that supports predictions and decision making with increasingly broad application. Rational approaches continue to provide the standard for effective decision making when considered in light of current limitations. Coping with complexity and information overload will place greater demand on enhancing capabilities that support rational choice.

Return from Rational Decision Making to Decision Making Styles

What is the rational decision-making model? Rational decision-making is a method that organizations, businesses and individuals use to make the best decisions. Rational decision-making, one of many decision-making tools, helps users come up with the most suitable course of action. In this blog, we will look at the meaning of rational decision-making, the importance of rational decision-making and study some rational decision-making examples.

Rational decision-making is a process in which decision-makers go through a set of steps and processes and choose the best solution to a problem. These decisions are based on data analysis and logic, eliminating intuition and subjectivity.

Rational decision-making means that every variable factor, every piece of information about all the available options, has been taken into account. 

The most basic use of the rational decision-making model is to ensure a consistent method of making decisions. This could be used as a standardized decision-making tool across an organization or to ensure that all managers receive the same information to make decisions. The rational decision-making process can be used to maintain a structured, step-by-step approach for every decision.

How the rational decision-making model is implemented can be explained in seven steps:

(There is also an example to help you understand the importance of rational decision-making)

1. Understand and define the scope

Just stating that a problem exists isn’t enough. Solid, accurate data is required to understand and analyze the problem in depth. This lets you know how much attention it requires.

It’s vital to collect as much relevant and accurate data around the problem as possible.

Here’s a rational decision-making example:

Your social media posts aren’t translating to conversions. What could the problem be? Once the analytics reports come in, you realize there isn’t enough engagement. The issue isn’t that your posts are not reaching the right audience, it’s that they don’t engage them. This sets up the next step: figuring out why the problem exists. Why is user engagement low?

2. Research and get feedback

The next step in the rational decision-making process is to delve into the problem. Find out what is causing the problem and how it can be solved. You could start with a brainstorming session and find out what your team thinks.

Rational decision-making example continued:

The budget is good, there are enough views and likes on the posts. So, why is there a lack of engagement? Why aren’t users interacting with the post? Why aren’t they clicking on the CTA?

You might need new types of posts; perhaps the current posts aren’t trendy. Maybe the posts don’t evoke an emotional response from the audience. Or they don’t convey what the product can do for the audience.

Now that you know what the causes could be, you are a step closer. It’s time to collate the data.

Rational decision-making example continued:

The team comes together with their opinions and findings. After a few customer surveys, the major issues are identified as follows:

• Potential consumers don’t know how the product will add value to their lives.
• Potential customers don’t understand the posts’ objectives and aren’t clear on what the product is.

3. List your choices

There are bound to be a host of opinions and innumerable choices about how to address the issue. Consider all of them so that you don’t create more problems later.

This is where you start to use rational decision-making:

Now that the problem has been understood, it’s time to list your options.

You could create a post that showcases what the product does.

You could have an informative GIF that shows that product in action.

You could create additional whitepapers to showcase how the product adds value and thus is beneficial for the customer to buy.

The analytics show that traffic isn’t the issue, so you don’t have to focus on garnering more traffic. Your focus has to be on conversions.

Your color schemes and CTA could be a little more impactful.

Maybe video clips are the way to go?

4. Analyze your options carefully

Now that you have all the options in front of you, cross out the ones that don’t add value or don’t solve the problem. Understand how each of the potential solutions could turn out and what other effects they could have.

Point 6 is about having a back up plan. Once you’ve chosen the plan that is likely to serve you the best, choose the second best option as well. You could use that as your back up, in case things don’t go according to plan.

While it’s great to get a quick solution to a real problem, the solution should be permanent or at least solve the majority of the issue.

The example of the rational decision-making process continued:

This is where you set about deciding the benefits of each of your choices mentioned above.

A video clip post would mean additional costs.

Redesigning the graphics may lead to more views and interaction but dilute your following.

A whitepaper is a good idea, but it doesn’t help with conversions. It’s ideal for customers to click on the CTA.

While GIFs are very popular, the image you choose has to convey the right information and be impactful. You may need to rework the branding for this to work.

While it would be great to have a post that showcases how the product works, it can’t be overly technical.

5. Understand the results you want

This is where the importance of rational decision-making comes into play. Understand what you expect from the solutions. There has to be a clear outcome because of the decision that is made. Knowing what you expect from your actions is important. It’s always a good idea to test the solution to see if it resolves the problem entirely.

Rational decision-making model example continued:

The best course of action might be to assign different teams for the different potential solutions.

One team could create a GIF, while the other works on the video clip and another on the ‘how to use’ post.

Once the teams have all made rough drafts, a productive critiquing session could be conducted. The teams can then look at each others’ solutions and point out the merits and drawbacks of each.

This way a general consensus can be reached and the best option or options can be selected. It is also advisable to use predictive social media tools. There are algorithms and equations that could help predict the success of a post to some degree.

6. Have a backup plan

While this may not always be necessary and can be a little cost-intensive, it may be worthwhile to have a backup plan if the solution doesn’t give you the intended results. This means that you should either have another strategy in place, created using the rational decision-making model.

Even though your plan has been made after careful thought, there is a chance that it either does not go as per plan or that an external factor interferes and throws your plan into chaos.

Try to have a back-up plan to make sure that your business isn’t impacted.

Rational decision-making model example continued:

Now that you’ve decided to go with a combination of a GIF and an information-based post, go ahead and begin drafting your white paper as well.

7. Implement

Once the team has done all the work and created the solution, implement it. Implementing this plan means that everyone has to be on board. This means that everyone should be informed and be willing to contribute in executing the plan. The plan won’t work if everyone isn’t working toward the same goal.

As logic and data have been used to reach the decision, it’s likely going to be the most effective one.

Non-rational decision-making is quite simply the opposite of rational decision-making. Non-rational decision-making is generally used when there isn’t enough information available or when there isn’t enough time to carry out the research and analysis required to employ rational decision-making methods.

Non-rational decision-making can be used when the person or team making the decisions has experienced that issue before or their collective experience allows them to predict what the outcome of their decision would be.

To sum it up, rational decision making can be the difference between a high performance culture driven by results and an unorganized setting. If you would like to drive decisions that guarantee results, you have to employ strategies that kindle organizational objectives based on real data. Let’s sum up the steps explained in this post about the importance of rational decision-making.

• Understand and define the scope
• Research and get feedback
• List your choices
• Analyze your options carefully
• Understand the results you want

Now that you have some idea of what the rational decision-making process is, you may be curious to find out how to make better decisions for your business. To understand more about the importance of rational decision-making, take a look at Harappa’s Making Decisions course. It delves deep into how the best decisions can be reached. The course is for you if you’re looking to get into business and learn how to use rational decision-making.

Explore Harappa Diaries to learn more about topics such as How To Define Problem, Steps involved in Ethical Decision Making, Importance Of Decision Making and How To Overcome Indecisiveness to classify problems and solve them efficiently.