In the light of many technical advances, decision-making theory has also added some nuances.
i) Rationality of a decision means basing it on objective criteria. Earlier the entrepreneur was a risk-taker. He would take a decision on the basis of available information and his hunch about the outcome. He could easily do so as he was risking his own money and promoting his own venture. During the course of time the ownership of an enterprise has been delinked with its management. A joint stock company is held by hundreds of thousands of small investors who have to leave the task of management to professional managers. They are accountable to the owners for their decisions. They have, therefore, an inherent reason to be more concerned about reducing the risk & uncertainty in decision making. Recent developments in technology have provided them with better tools for increasing the rationality of their decisions and consequently reducing the risk and uncertainty in decision-making. Computers have revolutionised the art of data processing storage and retrieved of information. They have also enabled better analysis of data by increasing the speed of mathematical calculations. More and more information about various alternative choices is now becoming available at short notice and it is being increasingly possible to assess the outcomes of taking alternative courses of action. No doubt, the availability of such a help is also making heavy demand on the intellectual capabilities and powers of judgement of the decision-makers. But, the element of risk and uncertainty is reduced to a great extent, although it cannot altogether be eliminated.
ii) Human Irrationality has been explored by the psychologists. There is something unpredictable and uncertain about human nature. The traditional theories take it as a premise that human beings act in a rational way. For example, in economic decision- making it is presumed that every individual and firm must be interested in maximising profit. Many studies have revealed that many entrepreneurs do not want to maximise profits but want to maximise sales. Psychological analysis has revealed that beyond a point the human beings lose the capacity to derive satisfaction out of profit. Instead they want to derive satisfaction from ‘bigness’. To some extent this satisfies the instinct of megalomania. Similar researches by psychologists can throw more light on the causes of seeming human irrationality and more knowledge may, to a certain extent, reduce it.
iii) Acceptance of Decision. This is another line of studies that have come up on decision-making process. How to get the decisions accepted so that they are carried out. Two obvious methods of getting acceptance of decision are :-
- taking recourse to emotional empathy and hypnotism.
Both the methods are fraught with the risk of undesirable consequences. They may be degrading to those on whom they are practised and may also bring resentment and resistance. The only desirable method appears to be to create in others the same awareness about the decision as in the decision-makers. This means imbibing a value system throughout the organisation. This may be done by frequent consultations and periodic in service training.
iv) Collective Decision-Making appears to be a contradiction in terms. A vast amount of literature has developed on the subject which has used a lot of mathematical jargon. In simple terms distinction has been made between two types of collectivity a team and a coalition. In a team only one person i. e. the captain makes a decision and others accept it. When a member joins the team he agrees with the rules. Hence he accepts the decision by consultation and contract. This is a team work at one end of the spectrum. At the other end is coalition. Each person has his own value system. Every one bargains with everyone else. A common decision emerges which is not exactly equal to anyone’s expectations. Bargaining is for a common goal as well as for individual goals. Out of this we get what is mathematically called a collective decision. In fact, a new branch of theory, viz. game theory has emerged to explain this. This has not so far been found to be of much use.
How does Theory of Decision-Making Help?
The theory helps the decision-maker see the individual decision-making situations in proper perspective. It provides his the yardstick against which he can judge his own behaviour. It is true that study of theory does not automatically lead to better decision- making, but it does provide better basis for practice of decision-making.