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Home > For Free > Articles > issue5vol5
How to Make More Rational Decisions
By David Brewster November 2005
Do you make rational decisions? Imagine you have that decision of all decisions to make: the seating plan for your upcoming wedding. 120 guests, 10 tables. All friends and family. Should be a breeze, shouldn’t it? Not so fast. Psychologists tell us you are unlikely to come up with the best solution.
It all starts out quite well. Then you realise that Aunt Beatrice can’t possibly sit at the same table as Uncle Barnaby after that nasty episode at the last wedding. And Grandma won’t speak to cousin Elizabeth since she got that thing through her nose. And … well, you get the idea.
120 guests, 10 tables. That’s 116,068,178,638,776 (116 trillion) possible table arrangements – not allowing for allocating specific seats.
Now, if you were to be purely rational about this exercise, you would sort through all those possible combinations. You would then choose the optimum solution. The one that puts Barnaby and Beatrice not only on separate tables but on opposite sides of the room. After all, you want to minimise the chance of a flare up.
In practice, you would be less rational. You would play around with various potential arrangements, one at a time, until you found the first satisfactory solution. Then you would stop. This solution may still put our warring siblings on adjacent tables but you still have the cake to organise, the suits to pick up, the band to confirm…
There is a name for our tendency to choose the first satisfactory outcome we find, rather than continuing to search for the optimum outcome. Psychologists call it ‘bounded rationality’. Bounded rationality limits the effectiveness of our decision-making: both in planning our nuptials and at work.
Nearly every decision you make in business has hundreds, thousands – even trillions – of potential variations. Pricing decisions. Purchasing decisions. Planning decisions. People hiring decisions. Very few are straight forward.
Bounded rationality suggests that most of these decisions will be sub-optimal. What’s more, research shows that the more complex the decision-making process, the less optimal the chosen solution is likely to be.
This is ironic because most of the complexity in decision-making processes results from trying to make those processes 'Uncle Barnaby-proof'.
Someone made a wrong decision one day, so an additional step was added to the process to stop it happening again. Repeat this cycle a few times and the process becomes as unfathomable as Aunt Beatrice’s coiffure.
A better result would be to work harder at making the process more simple. Inviting half as many guests, for instance. More friends, less relatives. The simpler the process, the greater your chances of getting a better overall result.
You can improve your own decision-making with training and practice. For groups, sometimes the use of an external facilitator can help. My associate, Cris Popp, a decision-making specialist, provides training to individuals and groups to help them improve their skills in the area of thinking, judgment and decision-making. He also facilitates group decision-making. He can be contacted on 0438 54 56 07.
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