This is a cross post from ideaplants.org:
When was the last time you made a rational choice in a complex decision?
Thinking about it seriously, I’m not even sure that I’ve ever made one.
How is it possible to consider all possible factors and anticipate what option might be best with our little brain that has a limited amount of knowledge?
The choice for the right study programme, the most promising job, the least polluting car, the relationship that will last forever or simply the greenest energy provider often bring us to the edge of our capabilities of making a rational decision.
James G. March wrote in his book ‘A Primer on Decision Making’ about the limitations of rationality. He identifies four factors that limit us in the way we make decisions while also considering challenges for organizations:
1. Problems of attention: Limitations in the time we can spend on considering all factors
2. Problems of memory: Capabilities to capture and process all the information we gather
3. Problems of comprehension: Capacity to grasp complex issues and interpret them correctly – this is especially difficult in complex situations that cover a wide field of knowledge areas
4. Problems of communication: Problems with sharing and communicating crucial information, factors that are not presented clearly and other limiting issues e.g. due to language and cultural differences.
All these issues make it quiet difficult for someone to make a decision that is solely based on rationality – this is probably not a good excuse for individuals and businesses, but it might explain certain behaviors and put off pressure of people that think they should always make rational and fair decisions.
Especially in organizations that have been around for a while decision making processes are extremely long and complex. In todays fast changing world, this limits and blocks the organization in making the right choices.
In today’s environment the biggest challenge is not anymore to make the right choice, but to adapt to the changing environment.
A lot of flexibility is demanded from individuals and organizations. It’s not a surprise that young organizations with less structure and processes seem to cope with this much better than multinationals that are following a model which is already many years old.