ABSTRACT
This chapter has outlined the psychology of decision-making. The following key points were identified:
A decision can be defined as making a choice between two or more alternatives.
A strategic decision is one that impacts upon the whole organisation, or of a large part of the organisation. They might also affect large segments of society.
There are two main schools of thought in decision-making theory. Normative decision-making uses a rational, logical process that consists of a series of steps to make a decision. Behavioural decision-making makes use of managers’ own experience, gut instinct, etc, and uses non-rational means to make a decision.
We have introduced the concept of cognitive heuristics. These are mental shortcuts, or “decision rules” that are part of everyone, and they are largely unavoidable. They are examined in detail in the next chapter.
