Rational decision making and long term decisions

RATIONAL
MAKING & LONG-TERM
DECISIONS
Presented by:
CHRISTELLE ANGELICA C. CORPIN, MA.ED
Ed.D Student

• Decision making is a central factor of internal
accountability and is crucial for managing
company performances. Managers are required to
continuously make decisions, but different criteria
need to be used, taking time and the impact of
decisions into account.

The business dictionary
• defines decision making as “the thought process of
selecting a logical choice from the available
options.” (Decision Making n.d.)
• styles are therefore the learned, habitual response
pattern exhibited by an individual, when confronted by
a decision situation (Scott and Bruce 1995).

Scott and Bruce (1995) proposed four
different types of decision-making models:
• (a) rational decision- making style, which is characterized by a
thorough research for and logical evaluation of alternatives;
• (b) intuitive decision-making style, which is characterized by a
reliance on hunches;
• (c) dependent decision-making style, which is characterized by a
search for advice and direction from others; and
• (d) avoidant decision-making style, which is characterized by
attempts to avoid making decisions altogether (Scott and
Bruce 1995).

• Rational decision making leverages objective data, logic,
and analysis instead of subjectivity and intuition to
help solve a problem or achieve a goal.
• It’s a step-by-step model that helps you identify a
problem, pick a solution between multiple alternatives, and
find an answer.

• Rational decision making is an important skill to possess,
especially in the digital marketing industry, in management, in
education and human resources.
• Humans are inherently emotional, so our biases and beliefs
can blur our perception of reality. Fortunately, data sharpens
our view. By showing us how our audience actually interacts
with our brand, data liberates us from relying on our
assumptions to determine what our audience likes about us.

• Being the opposite of intuitive decision making, rational
model of decision making is a model where individuals use
facts and information, analysis, and a step-by-
step procedure to come to a decision.
• The rational model of decision making is a more advanced
type of decision-making model.

• The rational style according to Russ et al. (1996) is
“deliberate, analytical and logical; rational decision
makers assess the long-term effects of their
decisions and have a strong fact based task
orientation to decision making” (p. 5).
• Rotter (1966) opined that the rational style seems
related to initiation of a structure and an internal
control orientation.
• Kholi (1989) has posited that both initiation of a
structure and a higher internal control orientation may
be linked to higher performance.

A Model of Rational Decision Making
• Rational decision making may involve several different processes.
Regardless of the various steps in each process, rational decision
processes have similarities that mostly result in effective solutions. A
model of rational decision making is presented in the following
steps:
• Identifying the problem that requires a solution
• Identifying the solution scenario
• Carrying out a gap analysis
• Gathering facts, options, and alternatives
• Analyzing option outcomes
• Selecting best possible options
• Implementing decision for solution and evaluate final outcome

IdentifyingtheProblemthatRequires
aSolution
• It is important in any problematic situation to properly clarify
what the problem is that requires a distinct decision-making
process for a solution.
• If the nature and source of the problem are not accurately
defined or identified, the manager stands a risk of
throwing solution options at a situation that is working
well or doing little to resolve the actual problem.
1

1. Verify and define your
problem.
• To prove that you actually have a problem, you need evidence
for it. Most marketers think data is the silver bullet that can
diagnose any issue in our strategy, but you actually need to
extract insights from your data to prove anything.
• To pinpoint your specific problem, collect as much data
from your area of need and analyze it to find any
alarming patterns or trends.
• Example:
“After analyzing our blog traffic report, we now know why our
traffic has plateaued for the past year -- our organic traffic
increases slightly month over month but our email and social
traffic decrease.”

Identifying the Solution
Scenario
• Equally important in the rational decision-making process is
defining what a solution scenario will look like at the end of
the process.
• Expanding your pool of potential solutions boosts your
chances of solving your problem. To find as many potential
solutions as possible, you should gather plenty of
information about your problem from your own knowledge
and the internet. You can also brainstorm with others to
uncover more possible solutions.
2

Example:
• Potential Solution 1: “We could focus on growing organic, email, and
social traffic all at the same time.”
• Potential Solution 2: “We could focus on growing email and social
traffic at the same time -- organic traffic already increases month over
month while traffic from email and social decrease.”
• Potential Solution 3: "We could solely focus on growing social traffic --
growing social traffic is easier than growing email and organic traffic at
the same time. We also have 2 million followers on Facebook, so we
could push our posts to a ton of readers.”
• Potential Solution 4: "We could solely focus on growing email traffic --
growing email traffic is easier than growing social and organic traffic at
the same time. We also have 250,000 blog subscribers, so we could
push our posts to a ton of readers.”
• Potential Solution 5: "We could solely focus on growing organic traffic -
- growing organic traffic is easier than growing social and email traffic
at the same time. We also just implemented a pillar-cluster model to
boost our domain’s authority, so we could attract a ton of readers
from Google."

Carrying Out a Gap Analysis
• A gap analysis is simply defining and understanding the gap
between the problem and the solution.
• The business dictionary defines gap analysis as “a technique
that businesses use to determine what steps need
to be taken in order to move from its current state to
its desired, future state.”
• Setting a threshold to measure your solutions' success
and failure lets you determine which ones can actually
solve your problem.
3

3. Set standards of success and failure
for your potential solutions.
• Your standard of success shouldn’t be too high, though. You’d
never be able to find a solution. But if your standards are
realistic, quantifiable, and focused, you’ll be able to find one.
Example:
• “If one of our solutions increases our total traffic
by 10%, we should consider it a practical way to
overcome our traffic plateau.”

• With the facts in hand, the
consequences or outcomes of
the various options identified
should be analyzed to
determine the most effective
and functional option.
• The goal is to accurately
predict the outcome of
each of the options
selected, and from these
predictions, a final option is
selected.
Analyzing Option Outcomes
3

• Potential Result 1: ‘Growing organic, email, and social traffic at the
same time could pay a lot of dividends, but our team doesn’t have
enough time or resources to optimize all three channels.”
• Potential Result 2: “Growing email and social traffic at the same
time would marginally increase overall traffic -- both channels only
account for 20% of our total traffic.”
• Potential Result 3: “Growing social traffic by posting a blog post
everyday on Facebook is challenging because the platform doesn’t
elevate links in the news feed and the channel only accounts for
5% of our blog traffic. Focusing solely on social would produce
minimal results.”
• Potential Result 4: “Growing email traffic by sending two emails per
day to our blog subscribers is challenging because we already send
one email to subscribers everyday and the channel only accounts
for 15% of our blog traffic. Focusing on email would produce
minimal results.”
• Potential Result 5: “Growing organic traffic by targeting high search
volume keywords for all of our new posts is the easiest way to
grow our blog’s overall traffic. We have a high domain authority,
Google refers 80% of our total traffic, and we just implemented a
pillar-cluster model. Focusing on organic would produce the most
results.”

Flesh out the potential results of
each solution.
• Next, you should determine each of
your solutions’ consequences. To do
so, create a strength and weaknesses
table for each alternative and compare
them to each other.
• You should also prioritize your
solutions in a list from best chance to
solve the problem to worst chance.
4

Choose the best solution and
test it.
• Based on the evaluation of your potential solutions,
choose the best one and test it. You can start
monitoring your preliminary results during this stage
too.
• Example:
• “Focusing on organic traffic seems to be the most effective
and realistic play for us. Let’s test an organic-only strategy
where we only create new content that has current or
potential search volume and fits into our pillar cluster model.”
5

ImplementingDecisionfor Solution
and EvaluatingFinal Outcome
• After the best option has been
selected, the decision has to be
implemented accurately as
decided for effective and
functional solution.
6

Track and analyze the results
of your test.
• Track and analyze your results to see if your
solution actually solved your problem.
Example:
• “After a month of testing, our blog traffic
has increased by 14% and our organic
traffic has increased by 21%.”
7

If the test solves your
problem, implement the
solution. If not, test a new
one.

Assumptions of the Rational
Decision-Making Model
• The rational model of decision making assumes that
people will make choices that maximize benefits and
minimize any costs.
• The idea of rational choice is easy to see in economic
theory.
• In general, people will choose the object that provides
the greatest reward at the lowest cost.

• The rational model also assumes:
• An individual has full and perfect information on which to
base a choice.
• Measurable criteria exist for which data can be collected
and analyzed.
• An individual has the cognitive ability, time, and resources
to evaluate each alternative against the others.
• The rational-decision-making model does not consider
factors that cannot be quantified, such as ethical concerns
or the value of altruism. It leaves out consideration of
personal feelings, loyalties, or sense of obligation. Its
objectivity creates a bias toward the preference for facts,
data and analysis over intuition or desires.

Critiques of the Rational
Model
• Critics of rational choice theory —or the rational model
of decision-making—claim that this model makes
unrealistic and over-simplified
assumptions. Their objections to the rational model
include:
• People rarely have full (or perfect) information. For
example, the information might not be available, the
person might not be able to access it, or it might take too
much time or too many resources to acquire.

• Individual rationality is limited by their ability to
conduct analysis and think through competing
alternatives. The more complex a decision, the greater
the limits are to making completely rational choices.
• Rather than always seeking to optimize benefits while
minimizing costs, people are often willing to
choose an acceptable option rather than
the optimal one. This is especially true when it is
difficult to precisely measure and assess factors among
the selection criteria.

The Process of Rational
Decision Making
• Rational decision making is a multi-step process for
making choices between alternatives. The process of
rational decision making favors logic, objectivity, and
analysis over subjectivity and insight. The word
“rational” in this context does not mean sane or clear-headed
as it does in the colloquial sense.
• The approach follows a sequential and formal path of
activities. This path includes:
• Formulating a goal(s)
• Identifying the criteria for making the decision
• Identifying alternatives
• Performing analysis
• Making a final decision.

The Key to Making Smarter
Long-term Decisions
• If we were rational, we would make choices based on our
long-term goals, not our short-term desires.
• “We’re trying to understand how one should behave.
[And] we’re trying to understand how
one does behave.”
• Understanding why we do what we do
• Looking ahead

• Rational decision making has been defined as a more
advanced type of decision-making model, laying emphasis on
the characteristics of thorough research and logical
evaluation, selecting among possible choices based on
reason and facts.
• Rational decision making should be extensively included in
leadership training, seminars, and conferences, specifically
those that border around management and sustainable
development within organizations and governments.
• Rational decision making is positioned as the most
promising, effective, and functional decision-making
process for leaders, managers, and individuals, especially
when stake- holders, investments, and high stakes are
involved.

REFERENCES
• Blume LE, Easly D (2008) The New Palgrave Dictionary of Economics,
Second Edition. Palgrave, Macmillan. Retrieved from
http://www.dictionaryofeconomics.com/ article
• Decision Making (n.d.) Retrieved from www.business dictionary.com
• Eppinger B, Nystrom LE, Cohen JD (2012) Reduced sen- sitivity to
immediate reward during decision-making in older than younger
adults. PubMed, 7(5). In Samanez- Larkin GR (2013) Financial
decision-making and the aging brain. Assoc J Psychol Sci Observer,
26(5), 30–33
• Kholi A (1989) Determinants of influence in organizational buying: a
contingency approach. J Mark 7(1):50–65
• Scott, S. G., & Bruce, R. A. (1995). Decision-Making Style: The
Development and Assessment of a New Measure. Educational and
Psychological Measurement, 55(5), 818–831. doi:
10.1177/0013164495055005017
• Uzonwanne FC (2016) Influence of age and gender on decision-
making models and leadership styles of non- profit executives in
Texas, USA. Int J Organ Analysis 24(2):186–203. Emerald Insight

ONLINE RESOURCES
• https://courses.lumenlearning.com/boundless-
management/chapter/rational-and-nonrational-decision-
making/ . Retrieved last April 19, 2020.
• https://www.oreilly.com/library/view/performance-
measurement-and/9780128019023/xhtml/chp007.xhtml.
Retrieved last April 21, 2020.

Rational decision making and long term decisions

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