By George Cretu
- The article is a part of an ongoing research work on decision-making process conducted by George Cretu. Any usage of the ideas and the concepts exposed in the article are allowed only with the author’s permission.
- The complete reference list will be provided when the second Issue will be released.
Blaise Pascal was born in June 1623 at Clermont-Ferrand (420 km from Paris). When he was 13, the young Blaise met the philosopher Descartes and the mathematician Fermat. Actually, he did not go to any formal school; his education was a continuous interaction with the outstanding thinkers of the time. Pascal’s outstanding natural science discoveries were in the period between he was 16 and 24 years; a brilliant mind. Afterwards he went to a monastery becoming a monk. When Blaise was 31, had an epiphany after two hours of meditational sleep. He wrote two pages of words (mostly difficult to be understood). The manuscript was discovered after his death and it was a debate about the existence of God. Here is the start of the decision theory. The philosophical framework was named Pascal’s Dilemma. The question of the Dilemma was: Does God exist? We do not know if God exists; so the question is if we should believe or not in Him. Pascal proposed an interesting answer: if we decide to believe in God and He really exists we will have a forever life; that means that we will have an important “profit.” However, if God does not exist, and we believe in him “the costs” are small- it is the life we can have with some insignificant effort. So, in this situation, the investment is small comparing with the gift we may have if God exists. Therefore, to believe in God is the best option. The Pascal’s Dilemma is the key for the modern understanding of the decision. The root of the decision-making is no more than an intellectual and spiritual speculation regarding the existence of God.
Besides the philosophy of the decision-making that has opened the discussion on prospect theory developed later on by Daniel Kahneman and Amos Tversky, Pascal approached the problem of opportunity costs. As a matter of fact the problem of opportunity costs is the main message of Pascal’s wager. These types of costs are related to the time the agent spends on getting the information, applies the logics and chooses an option. As a matter of fact the decision of believing in God is limited to the life spam. The opportunity costs are those costs that are not registered in the company’s records but they exist and dramatically affect the nowadays business. The opportunity costs are linked to the time the business organization reacts to the outside or inside events. This time is the decision time. Therefore, the decision-making architecture should be explored in the connection with the time as long as it is agreed that the time is the main dimension of environment the decision takes place.
Decision is the business concept that is missing from the practicality of the business. The problem that the business leaders are facing today is related to the question how to stay competitive in a fast moving, turbulent and disruptive world. The answer might be related to addressing the windows of opportunities faster and coherent than the competition. This truism can be methodologically translated in practice through a continuous operational effort for business acceleration. The structures, systems and business cultures built over the past century are not actual and do not support the efficiency and the effectiveness of the companies. Even the incremental adjustments are not viable solutions. In the context, the need for speed calls for putting the transactional elements of the organization such is decision-making as a central topic of the management research and practice. However, the Pascal’s dilemma is still alive and actual; it is intrinsically related to the efficiency.
As long as the structural reengineering of business organizations has proven its limitation in creating real value the attention of scholars and practitioners has moved to other management aspects such as talent quality of people, innovation and decision-making. In the context decision has become “the coin of the realm of business” (Rogers & Blenko, 2006). An extensive study on 350 global companied conducted by Bain & Company has shown that only 15 percent of organizations remain able to support the performance (Blenko, Mankins & Rogers, 2010). Another study of Bain & Company focused to 57 reorganizations campaigns between 2000 and 2006 found that less than one-third produced some touchable improvements in performance. Most had no effect, and some actually destroyed value. For the most of the studied cases, the performance did not improve. Bain & Company believes that the failure is rooted in a profound misunderstanding about the link between structure and performance. Performance is not determined solely by the nature, scale and dispassion of resources. The difference provided by the top performers was the ability to provide quality, speed, and execution of their decisions (Roger & Blenko, 2006). The acceleration as well as recognition of the evolutionary and dynamic features of the decision has been proven to become relevant aspects of the performance of the organization. Making decisions and making them happen fast are the important aspects of high-performing organizations.
For most companies, these studies have shown that it is required a fundamental rethinking of the approaches related to understanding the organization and the change oriented actions such as reorganization. Instead of with analysis of strengths, weaknesses, opportunities and threats, structural changes need to start with understanding the structure of decision ((Blenko, Mankins & Rogers, 2010). Bain & Company proposes the “decision audit” as the very start of any structural change. The goal of the audit are to understand the set of decisions that are critical to success and to determine the organizational level at which those decisions should be made and executed to create the most value. If you can align your organization structure with its decisions and create the management system to make them fast, than the structure will work better, and the performance will improve.
The most effective organizations focus on the major strategic decisions; but they should be supported by the operating decisions that require consistency and speed, as most important aspect. Today, there are not big decisions that can change dramatically the future of the firm. It may be only objectives that should be followed by sets of operational decisions. Therefore, a firm can be described as a set of decisions. The decisions that affect the firm’s performances are those event-based or operational. In spite they are small and apparently not significant they have a large cumulative effect. As long as the technology evolves, the event-based decision has become heuristic; the exclusive focus on the relationship between decision and behavioral and cognitive science is not according to the new required structure business development.
Temporal perspective on decision-making
Understanding the relationship between decision-making and time is essential for the concept of architecture applied to the decision process. In the world of continuous and irregular changes, procrastination (the term that shows the connection between time and human behavior) may be an important factor of efficiency problems. Taleb (2013) discusses the problem of procrastination versus intervention. He emphasizes that procrastination can have benefits when a natural intervention is better to be applied. However, in artificial environments, such an economic organization can be considered, procrastination is a real problem. Taleb (2013) notes “psychologists and economists who study irrationality do not realize that humans may have an instinct to procrastinate only when no life is in danger” (p.123). Procrastinate refers exclusively to decision; outside decision procrastination does not exist. To decide is related to the human instincts more than the mental processes and outside of the rationality debate.
Investigating decisions does not necessarily require a strict focus on the mental processes of the agents. It can mean examining the accessible components of decision-making, which decision need to be made, what information is supplied, key roles in the process and so forth (Davenport, 2009). Examining the architecture of decision-making is related to the investigation of the evolution of certain decisions in time. Two decades of process tracing studies have provided one robust conclusion: there is no generally used strategy for a particular choice problem, but the selected strategy is highly contingent upon various task and context factors, such as complexity or time pressure (Ford et al. 1989). In spite the decision-making is quite adaptive it is still based on a static decision task. Many real world tasks are dynamic in nature, which mean that the decision context changes over time. Understanding the time dimension of the decision-making is an important source of value for the economic organizations.
Decision architecture is related to the medium where the decision takes place; in the context, the time is an important artifact. There are many different interactions between time and decision-making; they are important in understanding the stages of decision making that represent the architecture infrastructure. Moreover, analyzing the time as the component of decision-making process may give the transactional perspective, even more that sell and buy perspective. The time perspective and the associated architecture may open the circumstantial relationship to both information acquisition, procedures, ability of the agent to create and explore the choices and the quality of the heuristics involved; that may create a quantitative methodological framework for understanding the relationship between decision and economic performance.
The research work related to the influence of time in decision making was not oriented to understanding the architectural aspects that may provides its role in designing the organizational performances; the researches were more focused on effects of the time pressure on decision performance (Kerstholt & Raaijmakers, 1997). In the research dedicated to decision-making in relationship with time there are some different approaches (Ariely & Zakay, 2001):
1. Static and dynamic decision-making approach. The main factor that makes the difference between static and dynamic decisions is whether the decision maker actively takes time into account. In making dynamic decision, it is not enough to know what should be done, but also when it should be done (Brehmer, 1992). Taking time into account can be either in terms of considering the duration needed, the optimal time to make a decision, or the changes in the structure as a function of time. Static decisions are the decisions where the time is not important. Despite the importance of the dynamic decision making, most of the decision making research has focused on static decision tasks. Kerthholt and Raaijmakers (1997) suggested that the reason for this emphasizes on single-stage static decisions is due to the difficulty of investigating dynamic tasks, because the lack of control resulting from the great number of different trajectories participants may activate through the decision space. Edwards, Lindman and Philips (1965) argued that only the dynamic approach better address the complexity of real-world decisions. Decisions take time to be taken, it is oriented towards future and the consequences may be developed over time (Ranyard, Crozier & Svenson, 1997).
2. Single and multiple stage decision-making. Despite the fact that most of the research on decision making trends to be based on static decisions, some models that are used to describe the decision making process are multi-stage models. These models are not dynamic because they do not take time into account directly; they do for a bridge between static and dynamic decision models. What differentiates most multi-stages models from each other is the specification of the different steps and the process that take place during the stages. There are various views on the multi-stage decision-making. Simon (1960) assigns three major elements to the process (1) finding occasions for making a decision; (2) finding possible courses of action; and (3) choosing among courses of action. Witte (1972) advances the notion of decision making as a total process involving discernable and separate activities: (1) information gathering, (2) development of alternatives, (3) evaluation of alternatives, and (4) choices. The process espoused by Schrenk (1969) focuses on three elements: (1) problem recognition, (2) problem diagnosis, and (3) action selection. Janis (1968) envisions a decision-making process with five stages: (1) recognition of a challenge, (2) acceptance of the challenge, (3) meeting the challenge through a choice, (4) committing oneself to the choice, and (5) adherence to the choice. Eilon (1979) advances a comprehensive process composed of eight stages, which begins with information input and culminates in a choice. Mintzberg and his associates (1976) offer an incredibly complex formal structure derived from twenty-five “unstructured” decision-making processes that are then organized into a general model of interrelated strategic decision processes. Fredrikson (1976) proposes a method for organizing noneconomic criteria in a decision-making process that includes four stages: (1) developing a criteria set, (2) posing criteria questions, (3) scaling the responses, and (4) choosing among alternatives. Nutt (1989) advances a decision-making process made up of: (1) exploring possibilities, (2) assessing options, (3) testing assumptions, and (4) learning. Two of the best known multi-step models: elimination by aspects described by Tversky (1972) and the lexicographic model (Svenson, 1979) can be seen as dynamic models, since the steps are actually similar in terms of the underlying cognitive process and they describe a process of iterations that continues until some criterion is met.
The real world, especially today when the uncertainty is prominent the decision is dynamic by definition and multistage by structure. Decision process consumes time for gathering information from the environment and from data, processing information and exploration among choices. Some decisions are very fast the decision in many cases emerges with lightning speed. Such decisions are habitual or intuitive non-analytic decisions (heuristic decisions), which are not based on extensive information processing (Russo & Schoemaker, 1989).
To be continued.