I am supposed to share with you this Sunday a PowerPoint presentation on the topic but alas, my luck with my internet connection is not holding up well, it seems. So, for now, let me just share with you the pertinent aspects of this topic, excerpts from an article, that I hope readers who are interested on this topic will find a bit helpful on their own research as well. For my reference, I would like to give credit to whom/where it is due. Thanks a lot to Sanjeev Swami for sharing such a comprehensive article on “Executive functions and decision making: A managerial review” (http://dx.doi.org/10.1016/j.iimb.2013.07.005).
So here goes the excerpts of this article.
The topic of decision making falls under the broad topic of executive functions. Executive functions are basically the management system of the brain.
The best way to explain the role of executive functions is that it is similar to a conductor’s role within an orchestra. He cues each musician, so they know when to begin to play, how fast or slowly to play, how loudly or softly to play and when to stop playing. Without the conductor, the music would not flow as smoothly or sound as beautiful (Low, 2009).
So, what is decision making?
Decision making refers to the mental (cognitive) process of selecting a logical choice from the available options. When trying to make a good decision, a person must weigh the positives and negatives of each option, and consider all the alternatives. Thus every decision making process produces a final choice which can be an action or an opinion of choice (Reason, 1990).
There are three theories of decision making: the Subjective Expected Utility (SEU) Theory, the Multi-Attribute Utility Theory (MAUT), and the Prospect Theory.
However, in real life, the decision problems are often so complex that the use of any one theory is usually ruled out. Instead, several cognitive biases and errors creep in our decision making. Thus, to simplify the decision making process, decision makers often use efficient decision rules known as heuristics.
Heuristics are rules of thumb or strategies that are likely to produce a correct solution, but are not guaranteed to do so.
Some commonly reported heuristics are:
- Representativeness heuristic. Under this heuristic, the events that are representative of a class are assigned higher probability of occurrence.
- Availability heuristic. It involves estimating the frequencies of events on the basis of how easy or difficult it is to retrieve relevant information from long-term memory.
Schoemaker and Russo (1993) in their “pyramid of decision approaches” discuss that there are four general approaches to decision making, which presents the practical aspects of executive decision making:
- Intuitions – receiving input and ideas without knowing exactly how and where you got them from. Other terms for it include: gut feeling, sixth sense, instinct,etc.
- Rules – quick and often clever ways to approximate an optimal response without having to incur the cost of a detailed analysis. Rule-based decisions means decisions that just follow the implemented rules and guidelines that already exist but which is subject to change thus must be updated on a continuous basis.
- Importance weighting – application of MAUT.
- Value analysis – when a decision is truly important and complex, value analysis conducts a more comprehensive assessment. It links factors to key objectives, which results in a “goal hierarchy”.
On the pyramid, the higher the method is, the more accurate, complex and costly it tends to be. However, the pyramidal shape shows also that higher approaches are used less frequently than lower ones and for more important decisions.
To sum it all up, executive decision making is a thought process which implies assessing and choosing from several competing alternatives, using either short-cut strategies or heuristics and cognitive biases or the more scientific approaches in decision making, depending on a situation that may arise.