Classical Approach to Decision Making
Classical approach is also known as prescriptive, rational or normative model. It specifies how decision should be made to achieve the desired outcome. Under classical approach, decisions are made rationally and directed toward a single and stable goal. It is applied in certainty condition which the decision maker has full information relating to the problem and also knows all the alternative solutions. It is an ideal way in
making decision. It is rational in the sense that it is scientific, systematic and step-by-step process.
There are four main assumptions behind the classical model:
- First is a clearly defined problem. The model assumes that the decision-maker has clearly set goals and knows what is expected from him.
- Next is a certain environment. The model further suggests that it is in the power of the decision-maker to eliminate any uncertainty that might impact the decision. As a
result, there are no risks to account for.
- The third assumption is full information. The decision-maker is able to identify all alternatives available to him and to evaluate and rank them objectively.
- The final assumption is rational decisions. The decision-maker is believed to always be acting in the best interests of the organization.
This model assumes the manager as a rational economic man who makes decisions to meet the economic interest of the organization.
Classical approach is based on the following assumptions:
- The decision maker has clear and well-defined goal to be achieved.
- All the problems are precisely defined.
- All alternative courses of action and their potential consequences are known.
- The decision maker can rank the entire alternatives on the basis of their preferred consequences.
- The decision maker can select the alternative that maximizes outcome.
The classical model is supposed to
be idealistic and rational but it is rarely found in practice. Therefore, this approach has many criticisms. It is known by normative theory rather than descriptive theory. Generally, managers operate under the condition of risk and uncertainty rather than the certainty condition. in many situations, complete goal stability can never be realized due to continuous environmental changes. It is applied only in the close system and not practicable in real life situations where environment is
changing rapidly.
Steps in the Classical Model
The classical model proposes three main steps for decision-making:
First is listing all available alternatives. Under the classical model, the decision-maker is not limited by time or resources and can continue looking for alternatives until he identifies the one that maximizes the utility from the decision.
The second step is ranking listed alternatives. The decision-maker is believed to possess not only all
required information but also the cognitive ability to prioritize the alternatives accurately and objectively.
The last step of the classical model is selecting the best-suited alternative.
Information Source:
- study.com
- accountlearning.blogspot.com
| Glossary
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| | Chapter 6
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| | administrative model
| The administrative model is descriptive, an approach that describes how managers actually make decisions, rather than how they should make decisions according to a theoretical model.
| | after-action review
| A technique adopted from the U.S. Army, the after-action review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn't, and how to do things better.
| | ambiguity
| Ambiguity means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable.
| | bounded rationality
| Bounded rationality means that people have limits, or boundaries, on how rational they can be.
| | brainstorming
| Brainstorming uses a face-to-face interactive group to spontaneously suggest a wide range of alternatives for decision making.
| | certainty
| Certainty means that all the information the decision maker needs is fully available.
| | classical model
| The classical model of decision making is based on rational economic assumptions and manager beliefs about what ideal decision making should be.
| | coalition
| A coalition is an informal alliance among managers who support a specific goal.
| | decision
| A decision is a choice made from available alternatives.
| | decision making
| Decision making is the process of identifying problems and opportunities and then resolving them.
| | descriptive
| The administrative model is descriptive, an approach�that describes how managers actually make decisions, rather than how they should make decisions according to a theoretical model.
| | devil's advocate
| A devil's advocate is a person who is assigned the role of challenging the assumptions and assertions made by the group to prevent premature consensus.
| | diagnosis
| Diagnosis is the step in the decision-making process in which managers analyze underlying causal factors associated with the decision situation.
| | electronic brainstorming
| Electronic brainstorming, sometimes called brainwriting, brings people together in an interactive group over a computer network.
| | escalating commitment
| Escalating commitment is the tendency for managers and organizations to invest time and money in a solution even when there is strong evidence that it is not appropriate.
| | evidence-based decision making
| Evidence-based decision making is founded on a commitment to examining potential biases, seeking and examining evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence.
| | groupthink
| Groupthink refers to the tendency of people in groups to suppress contrary opinions.
| | implementation
| Implementation involves using managerial, administrative, and persuasive abilities to translate the chosen alternative into action.
| | intuition
| Intuition represents a quick apprehension of a decision situation based on past experience but without conscious thought. Intuitive decision making is not arbitrary or irrational because it is based on years of practice and hands-on experience.
| | nonprogrammed decision
| A nonprogrammed decision is one made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization.
| | normative
| The classical model of decision making is considered to be normative, which means it defines how a decision maker should make decisions.
| | opportunity
| An opportunity exists when managers see potential accomplishment that exceeds specified current goals.
| | point-counterpoint
| Point-counterpoint is a way to encourage constructive conflict by breaking a decision-making group into two subgroups and assigns them different, often competing, responsibilities.
| | problem
| A problem occurs when organizational accomplishment is less than established goals.
| | programmed decisions
| Programmed decisions involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. Programmed decisions are made in response to recurring organizational problems.
| | risk
| Risk means that a decision has clear-cut goals and good information is available, but the future outcomes associated with each alternative are subject to chance.
| | risk propensity
| Risk propensity is the willingness to undertake risk with the opportunity of gaining an increased payoff.
| | satisficing
| Satisficing means that decision makers choose the first solution alternative that satisfies minimal decision criteria. Rather than pursuing all alternatives to identify the single solution that will maximize economic returns, managers will opt for the first solution that appears to solve the problem, even if better solutions are presumed to exist.
| | uncertainty
| Uncertainty means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete.
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What are the assumption of the classical decision model?
The classical model prescribes the best way to make decisions, based on four assumptions: a clearly defined problem, eliminated uncertainty, access to full information, and rational behavior of the decision-maker.
What is classical decision theory in decision making?
Classical decision theory assumes that decisions should be completely rational and optimal; thus, the theory employs an optimizing strategy that seeks the best possible alternative to maximize the achievement of goals.
Which of the following statements is true of the classical model of decision
Which of the following statements is true of the classical model of decision making? It assumes that decision makers have access to all the information they need to make the optimum decision.
Which of the following decision
Classical approach is also known as prescriptive, rational or normative model. It specifies how decision should be made to achieve the desired outcome. Under classical approach, decisions are made rationally and directed toward a single and stable goal.