A Model of
Executive
Decision-Making
Robert Shaw
The Open Polytechnic of New Zealand
PREFACE
This model of decision-making for executives is designed for
use when you implement policy.
The model was developed through a consideration of actual problems
identified by managers.
The model applies to complex decisions that would normally
be taken by senior managers. It considers aspects of decision-making such as ethics,
political and institutional constraints, and the limitations of rules; and
thereby illuminates the process of decision-making well beyond the
"information for" stage.
This approach to decision-making does not prescribe
"correct" conclusions in particular cases, but rather it allows
alternative perspectives to be considered within a structured format.
The development and validation of this model has been
recorded in the academic literature. It is a “generic” model designed to cover
policy implementation and course members may wish to develop this model to
address more precisely the specific decisions taken in their own organisations.
This booklet is designed for use during courses on
decision-making. Hence, it is for
managers who have worked through "The Customs’ Case”, and understand the
terminology of case studies. Having
completed the course, managers may find the booklet a useful reference when
reflecting on difficult decisions.
The project team who developed the model ask that persons
who have not been through the course
refrain from taking photocopies and misrepresenting or misusing the model.
Robert Shaw
Senior
Lecturer
The Open
Polytechnic of New Zealand
CONTENTS Page
SCOPE OF THE MODEL 3
ASPECTS OF DECISION-MAKING 4
USING THE MODEL 5
HOW THE MODEL HELPS 6
ACCOUNTABILITY 6
SUMMARY OF THE MODEL 8
GROUPING OF COMPONENTS 10
FINANCIAL CONSIDERATIONS 10
DIAGRAM OF COMPONENTS 11
CONDITIONS 12
FACTS 14
RULES 17
MORALITY 22
OPTIONS 25
RISKS 27
LEARNING AND
USING THE MODEL 29
FURTHER APPLICATIONS 31
CONSISTENT ADMINISTRATION 32
PRINCIPLES OF CRITICISM 33
LAW AND DECISION-MAKING 33
INTRODUCTION
This booklet describes a strategy (model) for executive
decision-making called Administrative Discretionary Justice (ADJ).
"Administrative” because public or company
administration is the context in which we are working. The model is about the implementation of
existing policy.
“Discretionary” because neither legislation nor ministerial
nor executive direction can make our decisions for us. There is scope to
interpret rules and the decision maker is obliged to make judgements.
“Justice” because we are concerned to do the right thing.
The decision must be explicit about moral concepts and we must treat people
morally.
The formal definition of Administrative Discretionary
Justice is: the resolution of the legal,
ethical and practical issues which arise in a situation where an official
acting in a capacity which is, in the final analysis, defined and limited by
government policy, legislation, or organisational policy, makes a just decision
which results in action or inaction which affects other persons.
SCOPE OF THE
MODEL
Most accounts of decision-making advise that there are 5 or
6 steps through which a decision-maker should proceed. One text, for example, lists these:
1. Identify why a decision is needed
2. Gather relevant information
3. Develop criteria for making a good
decision
4. Develop possible solutions.
5. Choose the best solution.
It is difficult to depart from a sequence such as this - it
does not make sense to make the decision until you have decided what are the
facts and the options!
Whilst the business of decision-making is straightforward
enough when described as an orderly sequence of steps, it is quite another
matter to describe how you identify the need for decisions, how
you decide what is relevant and ensure nothing is omitted, how
you examine possible decisions and balance factors when the situation is
complex. The model presented here is
the first move towards answering such questions.
The model was developed by considering a large number of
examples of managerial decision-making in government organisations and the
private sector. The developers tried to
classify the issues that appeared again and again in the dilemmas being faced by senior New Zealand managers
when they tried to implement policy.
These dilemmas were frequently found to arise once the
analysts' work was completed and a draft response to correspondence completed.
The ADJ model provides a systematic approach to decisions which
are made by managers when they have a relatively
specific situation to respond to, a
reasonable amount of time to respond, and are ultimately governed in their
response by rules. The rules are in legislation, bylaws, or other documents.
In some situations that do not conform to these limitations,
the model has been found to be of use - but the approach to decision-making
being described here should not be judged by a consideration of decision-making
in any wider context than that set down.
Managers ought to
look for the wider implications of individual problems, but the present model
is not a model for use in policy or
systems development. Policy development requires quite a different approach to
decision making. Policy development
is about changing the rules.
ASPECTS OF DECISION-MAKING
The model of
decision-making presented here addresses only one aspect of decision-making: it
is restricted to the objective factors
that could be used in the justification
of a decision.
When people make
decisions, what takes place in their heads (the psychology of decision-making)
and the nature of the interaction between the people involved (the “sociology”
of decision-making) can be important but the ADJ model is not concerned with
these matters.
It is important to
understand that the psychology and sociology of decision-making may be
separated from the objective justification of any decision. Understanding this
separation is essential if you are to focus on the qualities of decisions. There will be many paths by which
decision-makers may arrive at the same objective account of a decision. Some paths will be more efficient than
others. Some may depend on creative
insight. Others will be more like a process of elimination by trial and error.
But what is of importance in the present course are the merits of decisions
themselves.
The model for decision-making deliberately ignores the
psychology and sociology of decision-making.
This is for 2 reasons:
· Managers must justify their decisions in an objective manner.
(A chief executive cannot justify a decision to a minister by reference to the
idiosyncratic nature of the ministry officials!)
· Before we can begin to analyse psychological and sociological
approaches to decision-making we need to know what is the goal of these
processes. Most courses on the processes of decision making stumble because
they do not have an adequate account of the objectives of decision-making.
Another way of
stating the point above is to say we are concerned with defining what is excellence in decision outcome and
justification, rather than the efficiency or economy of reaching decisions.
It is outputs, not inputs, that count.
USING THE MODEL
The ADJ model is an
intellectual tool. Like all tools it
can be used inappropriately or abused.
If you have the model in your kit of tools and can produce it when
appropriate and use it to the extent of its capabilities, it will serve you
well. One of your early tasks is to learn when the model is appropriate and
information on that is incorporated into the model.
It is possible
to place too much reliance on a tool, or to let the use of the tool become the
aim of the exercise. The model should
not be allowed to take over and become an end in itself.
Like a tool
the model will help you build, and help to determine your approach to building
- it will not tell you what to build.
Nor will it alone determine the ultimate quality of the structure you
build.
Your judgement
will improve as you practice using the model. Judgement is cognitive ability to
bring complex factors into consideration and to heed them to the appropriate
extent when making decisions.
HOW THE MODEL HELPS
By increasing the confidence of managers in their own
judgement it may possible to minimise their reluctance to take decisions and
increase their willingness to accept responsibility.
The judgement
of managers can be improved. The model will
assist judgement in 4 ways:
· It will make a complex matter more straightforward by making
explicit the issues being considered.
· It will provide a systematic approach to the consideration
of the decision.
· It will enable the issues to be seen in their appropriate
intellectual traditions. This means
managers can be guided to areas of study that will advance their understanding
of the components of decisions.
· It will provide an approach to the testing of alternative
hypotheses to review the robustness of a decision.
The model alone does not miraculously give a person good
judgement. It can improve a manager’s
ability to argue complex, contentious points, but it cannot of itself provide
the answer. Some managers would like a model that leads to decisions as if it
were a computer programme. However, in the decision addressed by the model are
at heart ethical decisions and there is no way that such decision can be made
by an algorithm. If they could be so made, we would not need to development of
judgement.
ACCOUNTABILITY
The model also has a role in the provision of
accountability.
Privately, a manager has the confidence that the decision
made was based on a systematic process.
Publicly, the model provides accountability if controlling officers/managers
and subordinates acknowledge the value of the application of the model, and
agree that it leads to a comprehensive and systematic assessment of decisions.
By displaying a working sheet that shows the application of
the model to a decision, a manager may prove that comprehensive and balanced
consideration was given to the decision.
Mistakes will still occur, and there will be differences of opinion on
the weighting that should be given to particular matters, but with the model an
official will at least be able to prove the work was done: there were examined
reasons for the decision that was made, and all matters that may have had a
bearing on the decision were explicitly considered.
How to
implement policy:
A model -
ADMINISTRATIVE
DISCRETIONARY JUSTICE
SUMMARY
Definition of Administrative Discretionary Justice: the
resolution of the legal, ethical and practical issues which arise in a
situation where an official acting in a capacity which is, in the final
analysis, defined and limited by government policy, legislation or
organisational policy, makes a just decision which results in action or
inaction which affects other persons.
The model (ADJ) is made up of components. In order for an
official to address an administrative decision adequately, the following
components seem to be logically required:
CONDITIONS
The CONDITIONS of ADJ are those criteria, which must be
satisfied if the model is to be applied.
FACTS
The FACTS of ADJ are the circumstances, constraints, relevant
personal information, and the likely consequences of particular decisions,
which, when taken together, describe a particular case. Consideration of the veracity of facts and
the absence of information falls within this Component.
RULES
The written rules, including precedents, which are relevant
to or "govern" a decision, together with the guidelines intended to
preserve the integrity of the decision-making process, are the RULES of ADJ.
MORALITY
The MORALITY of ADJ requires the consideration of 2 issues:
(1) the moral principles that are held by the organisation or the
decision-maker to be potentially relevant in any application of ADJ (2) the
persons or parties affected (together with an account of how they are affected)
by a potential decision.
OPTIONS
OPTIONS are taken in accordance with the strategy suggested
by the model of ADJ when all the Components of ADJ are systematically
considered and taken into account in reaching conclusions.
RISKS
The tasks within the RISKS Component of ADJ are a
consideration of those matters that may affect the implementation of the
decision once it is made, and the development of practical proposals to assist
with its implementation. The focus is on the risks that are inherent in the
decision, but we must also be mindful of the opportunities presented.
Components contribute to the making of executive decisions
in different ways, but experience shows that at each decision point one or two
components usually dominate the discussion of alternatives being considered.
GROUPING OF COMPONENTS
It is not possible,
or sensible, to prescribe an order in which a decision-maker should proceed to
consider the Components - decisions are too diverse and components interact in
a variety of ways.
The Components
may be conveniently grouped to indicate their relationship to each other.
CONDITIONS
stands alone and it is the first Component to be considered in a decision. CONDITIONS outlines the criteria that must
be satisfied if the model is to be applied.
If you wish to know if a situation is one in which you can usefully
apply the model, ask whether the CONDITIONS are satisfied. The other Components contribute to the
making of the decision or to the development of an approach to its
implementation.
The Components
FACTS and RULES deal with factual matters of different kinds.
The Component
MORALITY deals with concerns of ethics; it examines the same concerns (i.e.
moral or ethical) from different perspectives.
Whilst the
Component RISKS, although it relates to possible events after the decision has
been made, needs to be assessed before the decision is made.
FINANCIAL CONSIDERATIONS
In all
Components there are questions relating to financial or economic matters that
may be asked about a decision.
To enable the
systematic examination of economic matters apart from other matters, these
questions are marked with an asterisk (*).
It is not
recommended that economic matters be divorced from other considerations in
practical decision-making, but for the purpose of teaching the model it is
sometimes desirable to do so.
THE MODEL: How
to implement policy
ADMINISTRATIVE
DISCRETIONARY JUSTICE
“Do I have a problem ...”
____________________________________________________________
Definition
The CONDITIONS
of ADJ are those criteria that must be satisfied if the model is to be applied.
____________________________________________________________
Key Questions
1 What are the prima facie
facts?
2 Am I
the appropriate manager to make the decision?
3
What decision options
immediately suggest themselves?
4
Is this clearly
policy implementation, or is it policy development?
___________________________________________________________
Notes
· The CONDITIONS Component asks the decision-maker to address
rapidly some of the matters that are exhaustively addressed when the model is
applied.
· Prima facie is there a decision to be made, and who is the appropriate
person, in which organisation, to make the decision?
· What opportunities for policy development does the situation
offer?
___________________________________________________________
Further Questions
1 Which are the essential facts that
require that a decision be made? (Is
this situation almost
completely
rule governed?)
2 Is this the appropriate organisation
or department? (appropriate to statutory functions or other directives.)
3 Are the authorities or delegations to
hand? Has the authority been given or
is it assumed?
4 Is it within my personal competence to
make this decision? (Do I accept this responsibility? Should the decision be passed "upstairs" or
"downstairs"?)
5 Are
there other organisations or managers within my organisation with whom I should
consult before making the decision?
6 Is the
information provided in an adequate form for decision-making? (e.g. is the
presentation of a report sensible and helpful?)
7 How
much time should I (or my subordinates) spend on the decision?
8 What
implications are there for policy or systems development? Should steps be taken
immediately to begin development work?
9 Is
economic analysis of options necessary before a decision can be reached? *
*Economic
Questions
“We
know that ...”
_________________________________________________________
Definition
The FACTS of
ADJ are the circumstances, constraints, relevant personal information, which,
when taken together, describe a particular case. Consideration of veracity of facts and the absence of information
falls within this Component.
_________________________________________________________
Key Questions
1 What
are the facts of the case? Which are
the essential facts that affect the decision?
2 Are
there facts relating to my organisation and current situation which must be
taken into account?
3 What is
the status of each statement? (What is absolutely certain, probably true, open
to dispute, hearsay, an allegation, not supported by evidence, supported by
evidence, provided by someone with a vested interest?)
4 What
information is needed but not available?
_________________________________________________________
Notes
·
Assembling facts,
questioning their veracity, and providing evidence to establish facts where
this is necessary, are all tasks within this Component. The establishing of facts may be a complex
and difficult task.
·
Experienced
decision-makers prefer to have all the facts and decide for themselves what is
relevant.
·
When facts relate to
moral issues it may be difficult but important to separate facts from
judgements and perceptions.