Most people would probably expect decision making in public services to be a thoroughly rationale process but evidence suggests this is not always the case as will be discussed later.
What we term rational decision making is a multi- step process for making choices between alternatives which uses a rational model of decision mak- ing ( Uzonwanne, 2016). The process of using a rational model of decision making favours logic, objectivity and analysis over subjectivity and insight.
The word “ rational” in this context does not mean sane or cl ear- headed as it does in the colloquial sense. The rationale approach is one which follows a se- quential and formal path of decision making activities. This path includes the following:
• Formulating a goal( s)
• Identifying the criteria for making the decision
• Identifying alternatives
• Performing an analysis
• Making a final decision
In line with basic economic theory, the rational model of decision making as- sumes that people will make choices that maximise benefits and minimise any costs. For example, when shopping most people want to get the most useful products at the lowest price; because of this, they will judge the benefits of a certain object ( for example, how useful is it or how attractive is it) compared to those of similar objects. They will then compare prices ( or costs). Under the ra- tional decision making approach, people will choose the object that provides the greatest reward at the lowest cost. In addition, the rational model also assumes the following:
• An individual has full and perfect information on which to base a choice.
• Measurable criteria exist for which data can be collected and analysed.
An individual has the cognitive ability, time and resources to evaluate each alternative against the others. The rational decision making model does not necessarily consider factors that cannot be quantified easily, such as ethical concerns or the value of altruism. It also leaves out consideration of per- sonal feelings, loyalties or sense of obligation. It may also exclude things which cannot be measured because people don’t know of their existence even though it might in principle be measurable. The rational model in its objectivity creates a bias toward the preference for facts, data and analysis over intuition or desires.
However, there are many criticisms of rational choice theory ( or the rational model of decision making) which claim that this model makes unrealistic and over- simplified assumptions. Their objections to the rational model include the following:
• Decision makers rarely have full ( or perfect) information. For example, the information might not be available, the person might not be able to access it or it might take too much time or too many resources to acquire. More complex models rely on probability in order to describe outcomes rather than the assumption that a person will always know all outcomes.
• Individual rationality is limited by their ability to conduct analysis and think through competing alternatives. The more complex a decision, the greater the limits are to making completely rational choices.
Even these more complex models are subject to critique though as the probabilities do not necessarily factor in issues which may be unquantifiable.
• Decisions may also be influenced by factors which may force manag- ers to decide less rationally. Governments are often criticised for setting up programmes too quickly because that is what the political timetable requires when actually if you were taking those decisions rationally you would have spent a lot more time on programme set up than actually happened. Also, in some situations there may be government incentives or disincentives which lead managers to choose an option which is not neces- sarily the optimal one. This is illustrated in Case study 5.1.
CHAPTER 5 Leadership, management and decision making 71 Rather than always seeking to optimise benefits while minimising costs, manag- ers are often willing to choose an acceptable option rather than the optimal one.
This is especially true when it is difficult to precisely measure and assess factors among the selection criteria.
CASE STUDY 5.1
Public- private partnerships and decision
making
The emergency services sector in a country employs a wide range of skilled personnel working in various aspects of emergency services. The sector has to undertake a wide range of training activities, on a national basis, for new recruits to emergency services and experienced members of staff who require their skills to be kept up to date.
Currently training facilities are piecemeal and of poor quality, and this is having a deleterious effect on the level and quality of training. Indeed, a number of published reports have indicated failures of training which have led to deaths following incidents. Consequently, the senior management of the training department have prepared a business case for the construction and equipping of a bespoke training unit which, in the country’s own currency, is the equivalent of several millions of US dollars.
The government of the country is aware of the pressing need for this development and has approved the business case. However, because of economic problems, they have difficulties in identifying a source of funds for the project.
Hence, they have encouraged the senior management to look at a public- private solution using the Private Finance Initiative ( PFI) model.
The senior management has developed a PFI proposal involving a construction company, a service company and a bank, and has prepared the required financial forecasts. They are also required to undertake the same level of analysis for a publicly funded approach to the project and to compare the publicly funded and PFI models to see which is most appropriate.
A first cut of the financial analysis suggests that the publicly financed model would be the preferred approach, but the senior management is aware that no government capital funds are available. Hence, if the PFI route is not chosen the project will not proceed. Hence, they agree to make some changes to the forecasts in order to suggest that the PFI route is the best option.
They make these changes in the knowledge that the project specification is likely to change during the course of the project, and the final project may look significantly different from the original planning version. Hence, no real ex- post comparison of the PFI version of the final project can ever be made against the publicly financed version of the original project.
The term non- rational decision making should not be read as someone being stupid, careless, unthinking, etc., although in some cases that might be true.
Non- rational decision making is more to do with limitations of the decision making process. N on- rational models of managerial decision making are likely to be applied where there is a lack of information which may be completely una- vailable or unavailable within a reasonable time and/ or reasonable cost. Equally the time available to decision makers to make a rational decision may be insuf- ficient for a variety of reasons. These sorts of limitations make it difficult for managers to make optimal decisions.
Some non- rational decision making models include the following:
• Bounded rationality – developed by Herbert Simon ( Simon 1991), this approach holds that managers seek alternatives only until they find one that looks satisfactory, rather than seeking the optimal decision. Bounded rationality means that the ability of managers to be perfectly rational in making decisions is limited by such factors as cognitive capacity and time constraints. As already noted, actual decision making is not perfectly ra- tional because of inadequate information, inadequate time, limited human memory and limited human data- processing abilities or the decision mak- er’s own misperceptions or prejudices. Thus, satisficing can be appropriate when the cost of delaying a decision or searching for a better alternative outweighs the likely payoff from such a course.
• Incremental model – this holds that managers make the smallest response possible that will reduce the problem to, at least, a tolerable level. In these situations, managers can make decisions without processing a great deal of information. Such incremental strategies are usually more effective in the short run than in the long run.
• Garbage-can model – this model of decision making holds that managers behave in virtually a random pattern in making non- programmed deci- sions. Factors that determine decisions include the particular individuals involved, their interests and favourite solutions to problems, as well as any opportunities they stumble upon. The garbage- can approach is often used in the absence of solid strategic management and can lead to severe problems.
• Negotiated Order – this is a sociological approach that is interested in how meaning is created and maintained in organisations with a particular focus on human interactions. Negotiated order in an organisation con- cerns the pattern of activities that has emerged over time as an outcome of the interplay of the variety of interests, understandings, reactions and initiatives of the individuals and groups involved in the organisation. To examine negotiated orders in any given organisation is to turn away from the more traditional way of looking at organisations that give primacy of attention to the pattern or ordering of activities chosen ( or “ designed”) by those officially in charge of the organisation. Studies in public ser- vice organisations suggests that, at least, some decision making at the
CHAPTER 5 Leadership, management and decision making 73
CASE STUDY 5.2
Health sector decision making and negotiated order
Negotiated order is a theoretical perspective which argues that virtually all social order is negotiated order. To accomplish tasks and to make decisions people chiefly negotiate with each other. It argues that management scholars seeking to understand decision making in organisations should focus on the characteristics of the negotiation context, as well as social and structural contexts in which the decision is taken.
In the UK NHS, clinical commissioning groups ( CCGs) are the organisations who decide what health services are needed in an area and then enter into contracts with service providers to deliver those services. Thus, Longlinks CCG is responsible for the commissioning the bulk of health service in its area.
The CCG was undertaking a major review of its community health service activities which were seen to be in need of a reconfiguration to reflect changing population needs. The task facing the CCG was that of deciding what to do with this group of services essential to it achieving its strategic objectives. To achieve the necessary changes to service configuration they identified two main strategic options:
• To work with existing providers to reconfigure services
• To undertake an open market procurement exercise to identify a suitable pro- vider of services according to a new service specification
(continued)
organisational level is often a process of negotiated order ( Cox 2019) rather than evidence based. Where there is an absence or paucity of data and evidence, decision making often involves an interplay and trade- offs between individuals in the decision making forum who have a variety of opinions, experiences, skills, prejudices, etc.
Returning to our earlier point about the expectation that decision making in public services would be rational, a moment’s reflection will show that this is just not the case. From our own experiences of public service organisations, most of us will, probably, have observed decisions which have utilised some or all of the n on- rational models at various points in time. In fact, the completely rational decision making process is probably a rarity as a consequence of the real- life constraints outlined. This does not mean that we shouldn’t strive for greater rationality. Case study 5.2 outlines a possible n on- rationale model of public service decision making based around negotiated order.
This was a major strategic decision for the organisation and in making such a decision there were a wide range of factors to be taken into account including the following:
• Public and stakeholder expectations
• Clinical Evidence
• National Health Policy
• Environmental factors
• Health Needs
• Financial constraints
• Cost data
• Risks, etc.
For many years, the term “ evidence based policy making” has been something of a mantra in the NHS, and there is an expectation that major decisions such as this one will be primarily based on evidence. Unfortunately, there are still many situations where sufficient reliable evidence is lacking. This was such a situation.
In- depth research in the CCG suggested that in a situation such as this where evidence is lacking, decision making becomes a process of negotiated order between the participants in the decision making process. Each participant will have their own knowledge base, experiences, prejudices, etc., and this will factor into the decision making process. The participants in the decision making will involve general medical practitioners, other clinicians including a nurse and a secondary care consultant, and lay members and thus will have varied backgrounds.
Now this strategic decision, clearly, does not meet the criteria for a rational decision making model. However, the rational model is really a normative approach which can be regarded as an ideal situation. Now this is not to suggest that the decision made was bad or incorrect. However, it does suggest that the decision is a non- rational in the technical sense and is also subject to bounded rationality.
However, the thrust of this book is that with better financial information and advice one can push the actual decision making closer to the normative model without ever actually getting there. Clearly, financial information is not the only issue or even the most important issue, and other data and information is also important in making decision making more rational.