Problem solving & decision making

Problem solving & decision making

A decision is loosely defined as a choice between alternatives, that results in an allocation of resources - money, personnel, time, etc.

There are good decisions - good in the sense that they were logically made - and there are also good outcomes. The assumption is that a good decision will lead to a good outcome.

Decisions are made from the considerations of objective data classed as certainties, and objective and subjective data classed as uncertainties. The manager - using the word in its broadest sense - is constantly faced with the integration of uncertainties with certainties, to make decisions.

The manager is thus, by profession, a decision maker, and is constantly faced with the integration of certainties with uncertainties. However, these professional decision makers are very frank about their inability to explain and analyze their acts of decision.

Former General Motors President Alfred Sloan, commenting on the company's founder William C. Durant, characterized him as a man who "would proceed on a course of action guided solely, as far as I could tell, by some intuitive flash of brilliance. We never felt obliged to make an engineering hunt for the facts. Yet at times he was astonishingly correct in his judgments."

Now, half a century later, in this age of computers with their reams of data, of impressive charts, graphs, decision trees, and probabilistic and statistical technology - of reliance on the quantitative - it is becoming more and more difficult for many executives to live with, much less acknowledge, the fact that a great many of their important decisions are, as Durant's seemed to be, intuitive. There seems to them to be something unscientific, unprofessional, about "flying by the seat of one's pants," acting on what seems to be little better than hunches or instinct - at least, so these executives believe. Therefore, they do not often discuss it.

Yet, the higher a person rises and the more complex their decision process, the more incomplete the support evidence available to them is, and the more intuitive their decisions must become.

At positions low in the organization hierarchy the decisions are delineated, limited, and repetitive. At the highest levels, assuming the practice of the Exception Principle, decisions are very broad and have much more to do with future events. At the lower levels, the decisions are less complicated, based on more reliable and objective data, and less costly if a mistake occurs.

At the higher levels, they get very complicated, have to be based more on suspect, unavailable, and/or non-existent data, and often carry a large dollar sign on them. Therefore, the pressure is greater at the top to make profitable decisions.

The decision makers of the future will find themselves making decisions involving even more considerations than are present today.

Classifying decisions

To try to better understand the decision making process, H.A. Simon classified decisions into programmed and non-programmed.

The programmed decision is repetitive and routine, has a definite procedure worked out for it, and does not call for a novel approach each time a problem comes up.

The non-programmed decisions are novel, unstructured, have no "cut and dried" method for handling the problem, and call for intelligent adaptive and problem oriented action when solving the problem. He further notes that the traditional techniques for these Non-Programmed Decisions are judgment, creativity, and intuition.

C.I. Barnard categorizes decisions into logical and non-logical.

Logical decision making involves conscious thinking and reasoning, and the process is expressible in words or other symbols.

Non-logical decision making is not capable of being expressed in words, or as reasoning, and is made known only by the action itself. He feels that this may be because these decision making processes are unconscious ones.

The basis for decisions

The categorization of decisions raises the question of when each type is utilized.

The answer to the question is that it is the type of data or information available to the decision maker that determines what category of decision making will be used.

Referring again to Barnard, materials for decision making can be classed as precise information, hybrid information (data of poor quality or limited extent, doubtful validity, qualitative, etc.), and information of a speculative nature (data not susceptible to mathematical or probabilistic expression, has uncertainties, difficult to ascertain, based on impressions, etc.)

F.I. Shartle states: "Most decisions are made on the basis of incomplete evidence. Facts may not be available, or there may not be sufficient time or staff assistance to uncover or assemble them. Thus, a good executive must be a good guesser. He must piece together the fragments of facts he has, and act accordingly. Some executives have reputations for being uncanny in making the right decision without apparent evidence."

Bernard was also of the opinion that the large part of the data for decision making was of the non-precise variety.

All through the decision maker's life, he or she has been taught to depend on facts and logic; but yet, the data used for decision making does not lend itself to the logical processes. Psychologists also tell us that most decisions are not based on a logical approach, but on an emotional basis.

There has been so much emphasis on the dependence of reason that the decision maker becomes afraid to trust his own judgment.

Ray Brown also mentions this problem in his book. He stated that people tend to be suspicious of decisions that arise from a person's individuality. Thus, decision makers try to make everything look objective.

In reality, they make the decision, then look for the facts to support it.

He further comments that if decisions spring from the facts, the decision maker would not be needed because he would be a transmitter and contribute nothing.

Simon also noted the lack of an objective basis for decisions by stating that:

1. Regarding incomplete knowledge: "In fact, knowledge of consequences is always fragmentary."

2. Since consequences lie in the future, imagination must supply the lack of experienced feeling in attaching value of these consequences.

3. Very few of the possible alternatives are available.

When the basis for a decision is precise, reliable, and objective, the methodology of logic and reasoning or the scientific method can be used.

However, the above indicates that such decisions would probably be made at the lower levels of the organization.

John McDonald was of the opinion that business executives make mostly repetitive and routine decisions. Some executives estimated that their routine decisions comprised up to 90 percent of all the decisions they are confronted with. Therefore, the novel or "true" decisions are infrequently made.

With the advent of the management sciences, and of the computer, a great deal of work has been done with data that is not so precise, reliable, etc. This methodology, given the title of Decision Risk Analysis or Cost/Benefit Analysis, is an example of such an approach. It is an approach that has been helpful to modern day managers.

Unfortunately, the advent of the management sciences and the computer also brought with it a renewed attempt to quantify everything. This has led the decision maker to forget that these techniques and tools were designed to aid in the collection and analysis of data but will not make the final decisions for him.

Ernest Weinwurm, in his 1960 American Society of Mechanical Engineers Report discussing progress in Management Science, decried the overemphasis on quantification of data, and the lack of attention given the decision maker.

R.E. Brown speaks of a "data addict" who sits in front of the computer waiting for decisions to come out. He further states:

"The top billing being given to scientific methodology in decision making is causing administrators to adopt increasingly an 'embarrassed to know you' attitude toward intuition. Because intuition occurs in the absence of had facts, or ahead of the facts, it is being written off as being in the same company as the divining rod of the well digger and the tea leaves of the soothsayer. The inability of intuition to identify the specific facts with which it associates is causing it to be increasingly considered intellectually disreputable. However, it is just this facility for producing ideas of nebulous origin that makes intuition such an extremely able adjunct of the administrator's judgment."

It seems that non-logical, non-programmed decisions have been ignored. A methodology for them is not being developed with the fervor reserved for decision making under certainty, and under uncertainty and risk. If one looks at the writings in the field, the back of the book may say a little about decision making based on data of a speculative nature. Intuitive, or precognitive decision making is "persona non grata."

How executives make decisions

How do executives actually go about making their important decisions?

McDonald surveyed a few executives and found that "they are remarkably candid about their own inability to analyze the act of decision."

A sample of the replies were:

Charles Cox, president of Kennecott Cooper says: "I do not think businessmen know how they make decisions. I know I do not."

Charles Dickey, chairman of the executive committee of J.P. Morgan & Company says: "There are no rules."

Benjamin Fairless, ex-chairman of U.S. Steel: "You do not know how you do it."

John McCaffrey, president of International Harvester: "It is like asking a pro baseball player to define the swing that has always come natural to him."

Dwight Joyce, president of Glidden Company: "If a vice president asks me how I was able to choose the right course, I have to say, 'I am damned if I know'."

The New York real estate and theater wizard Roger Stevens, reversing Thomas J. Watson's famous maxim, says: "Whenever I think, I make a mistake."

Fletcher L. Byrom, president and chief executive officer of Koppers Company, giving top executives advice, said:

"I have found that some of the most horrible mistakes we have made came after I ignored my intuition under the pressure of what looked, at the time, like unshakable evidence."

In a personal letter to the author, the manager of the corporate economic planning division of a major oil company, who has been in the operations research field for about 12 years, wrote:

"I have been getting the unsettling feeling that many decisions are, and perhaps have to be, based on what I would call 'gut feel' or intuition."

The Wall Street Journal of November 3, 1971, began a front page article on Charles G. Abbot, the retired secretary of the Smithsonian Institution, with the following words:

"Charles Greeley Abbot dreams things up.

"At two o'clock on the morning in July 1965, for example, Mr. Abbot awoke in his suburban bedroom to find that he had been dreaming about something that had not been invented yet. So he invented it. Then he went back to sleep.

"Things happen that way with Mr. Abbot, inventor and scientist and sage. Some of his best ideas came as dreams in the middle of the night."

Based on both this and other written material, as well as a great deal of oral material gathered form discussions with executives, it does seem that executives do use intuition or precognition in their decision making process.

Today's managers are paid to find and define problems. Analyze them, develop alternate solutions for them, decide upon the best of these alternates for each problem, and, finally, act upon these decisions.

In the main, these decisions have to turn out to be profitable ones, or the decision maker is forced to vacate his position.

The precognitive decision maker

President's scores

The engineer and problem solving

Development of precognitive abilities

The utilization of precognition ability

Some anecdotes

Back to Intuition in Business page

Intuition for Better Health | Better Relationships | Intuition in Business | Personal Development | Links

P.O. Box 435, Palestine, TX 75802, Phone 1-866-32-AVLIS (866-322-8547) or 903-922-2532