Friday, November 17, 2017

Managerial Decision Making: Importance of Intuition in the Rational Process

by Ivana TICHÁ, Jan HRON, Jiří FIEDLER

Summary

This article discusses the role of intuition in managerial decision making. The article aims at contributing by reviewing the current literature on intuitive decision making and by describing the use of accumulated knowledge and intuition as applied by the managers. The rational analysis approach has been adopted when it comes to decision making particularly in the business environment. The process involves collating, analyzing, and interpreting the collected information, then formulating alternatives. Afterwards, the choice of the best option is derived using common sense. The speed of communication, reduced time to examine data and relationships, and the lower stability and predictability of the business environment has increased the complexity of decision making.

The paper describes intuition as a highly complex and highly developed form of reasoning that is based on years of experience and learning, and on the facts, patterns, concepts, procedures, and abstractions stored in the decision maker’s head. Depending on the situation and the experience of those involved, the use of intuition relies on the manager. Managers are able to develop an internal reservoir based on the accumulation of experience and expertise.  

According to the paper, the intuitive decision making can be trusted only when following four tests which also support the argument that intuition is not rooted in emotions rather in reason.

·       The familiarity test – this test builds on the nature of intuition working on the pattern recognition. The appropriate familiarity is judged against major uncertainties of the decision-making situation.
·      The feedback test – previous decisions build into the reservoir of lessons learned and associated with the decision emotional tags. Positive emotions associated with the previous decision support further decisions.
·    The measured emotions test – relates to the strengths of emotions associated with the previous decisions.
·       The independence test – aims to avoid any conflict of personal interests.

The paper concludes that intuition is integral in the decision-making process and generally accepted by both practitioners as well as the academia. The paper points out the need for further research into many aspects such as specific situations in which intuition works well, the decision type, which can be associated and supported by intuition, the decision maker’s profession, the experience and industry, the nature of the organizational culture. The direct correlation between intuition and rationality is identified due to their nature of being able to meet the needs of a decision-making situation. 

Critique

The paper properly addresses the integral nature of intuition in relation to decision making by managers. The four tests that are necessary before intuitive decision making can be trusted serve as a good baseline for evaluating the decisions that are produced. There was no mention of how cognitive bias plays into the intuitive decision-making process. It would have been good to see if there are any distinctions between making decisions by drawing from intuition or bias. A manager’s well-honed intuition can be very instrumental in the success of the organization which is reflected in the quality of decisions that are made.
Source
http://www.agriculturejournals.cz/publicFiles/32213.pdf

1 comment:

  1. I find the four tests interesting, it appears it can help to reduce bias and make the decision-making process very thorough for the manager. I also like the distinction between intuition and the rational analysis approach which is important to mention in the fast-paced business environment.

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