Understanding Decision-making Processes

A number of approaches to the decision-making process are summarised in Appendix 1.

While there are occasional variations to the process, the typical process may be

summarised in Eisenhardt and Zbaracki‟s (1992) description of a rational model, which includes three main steps: problem identification, development and selection. Other processes have been identified which expand on these steps, such as that proposed in OBB by Robinson, Faris and Wind and noted again by Johnston and Lewin (1996). This process includes eight stages:

1. Recognise need,

2. Determine characteristics required of solution, 3. Establish specifications,

4. Identify potential sources, 5. Request proposals,

6. Evaluate proposals, 7. Select supplier, and 8. Evaluate the purchase.

The purpose of considering varying steps is to be aware of the potential stages which a company may work through. However, while these logical and incremental steps are presented in a “rational” manner, it is important in considering decision-making that limits of rationality are recognised.

Pure rationality assumes perfect and shared knowledge among the decision-makers concerning the alternatives and consequences, and that “the consequences and

alternatives are defined by the environment” (March, 1994, p. 5). In reality, however, uncertainties exist and though individuals may intend to be rational, they will be limited

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in this. In March‟s words, this model of pure rationality “strains credulity as a

description of how decisions actually happen” (1994, p. 5). Subsequently, bounded or limited rationality recognises that decision-makers face constraints of information, and make adjustments to their approach.

Eisenhardt and Zbaracki (1992) note that the debate between pure rationality and bounded rationality has died down and bounded rationality has been accepted, although there are many variations of theories which reside under the umbrella of bounded rationality. Three key conclusions these authors make in terms of these theories and the decision process include:

(1) … the existence of cognitive limits to the rational model. Decision makers satisfice instead of optimize, rarely engage in

comprehensive search, and discover their goals in the process of searching.

(2) many decisions follow the basic phases of problem identification, development and selection, but that they cycle through the various stages, frequently repeating, often going deeper, and always following different paths in fits and starts …

(3) the complexity of the problem and the conflict among the decision makers often influence the shape of the decision path (Eisenhardt &

Zbaracki, 1992, p. 22).

So while there is a decision path, there may also be variations, iterations and complexity.

This is perhaps in contrast to calls in sponsorship and philanthropy for more systemisation, but raises questions such as are decision-makers in arts sponsorship satisficing? Are there phases of the decision process? How complex are arts sponsorship decisions perceived to be? And does complexity influence the rationality of these

decisions?

March further contributes to this discussion of bounded rationality by offering two perspectives, by way of “logics” on decision paths. One logic proposed by March (1994) is the “logic of consequence”, where decision-makers make a choice based on answers to four questions:

 the alternatives, or what is possible,

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 the expectations or consequences combined with the associated likelihood of alternatives,

 the preferences or value of the consequence to the decision-maker, and

 the decision rule – that is, how the choice is made.

While the logic of consequences is essentially choice-based, March also proposes a

“logic of appropriateness” which is rule-based. Under this logic, decision-makers consider three key questions concerning recognition, identity and rules:

1. recognition concerns what kind of a situation is this?

2. identity looks at what kind of a person am I and what kind of an organisation is this?

3. rules link the above questions asking “ what does a person/organisation such as I am and such as this organisation is, do in this situation?

The above suggests decisions are unlikely to be purely rational, given cognitive limits of individuals, as well as the lack of perfect information about the alternatives which exist.

Due to the characteristics of and potential conflict between individual decision-makers as well as the complexity of the problem, decision paths may well vary. While the “basic phases” of decision making may be problem identification, development and selection, decisions may be characterised as more based on the analysis of consequences or an analysis of the situation and rules which exist. In terms of arts sponsorship decisions, which have not been studied from these perspectives, one might ask about the influence a single decision-maker, with their cognitive limits may have, and whether a logic could be identified which would fit arts sponsorship decisions.

While the processes still may appear logical, it is also recognised that the decision-making process may not always run smoothly or logically. Part of the lack of logic may be attributed to conflict as noted by Sheth (1973). The introduction of conflict appears to sit closely beside Eisenhardt and Zbaracki‟s (1992) description of a political decision, where “the key assumption is that organisations are coalitions of people with competing interests” (p.23). Under this perspective the importance of conflict resolution and the use of power and political tactics come to the forefront. The choice process is not

characterised as “intendedly rational with cognitive limits” as in bounded rationality, but as a “conflict of interests, dominated by powerful coalitions”(Eisenhardt & Zbaracki, 1992, p. 32). These authors find acceptance within the literature that power, politics and

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conflict are important pieces of the decision-making puzzle. In terms of the earlier sponsorship and philanthropy discussions, this theory seems akin to studies of the role of the individual and the potential involvement of the CEO or higher levels of executives who possess a degree of power.

The final model reviewed by Eisenhardt and Zbaracki (1992) is the “garbage can model”

in which organisations are viewed as “organised anarchies” with participation in the process as being “fluid”, goals “ambiguious, shifting” and choice processes the “random collision of problems, solutions, participants and opportunities” (p. 32). While the authors find modest support for the model, and propose that the methodological validity in studies is “surprisingly soft” (p. 31), the model does point to the potential influence of chance or serendipity, something acknowledged in marketing as potentially influential (Brown, 2005).

The above highlights possible variations in processes, and many have suggested that while a decision-making process may be defined or categorised, it is likely to vary depending on the situation. Bunn (1994) noted that “organisational buyers use

alternative decision processes for different situations” (p.38). Similarly in considering decisions specifically surrounding ethical issues, Rodgers and Gago (2001) proposed four elements to the process (perception, information, judgement and a decision), which may be combined together in any of 6 different pathways. Would then arts sponsorship be identified as a particular situation? Or even within arts sponsorship, could there by a variety of pathways which could be identified?

This discussion highlights a series of important points. Firstly, within the process of decision-making, there is likely to be a problem or need, an evaluation of possibilities and a final choice. The order in which these are played out varies, and not all steps may be followed. Underneath this process layer, there exists a series of variables which will both influence and characterise the path. Taken from the above discussion, these variables may include the following:

o Individuals, their associated power and politics, conflict resolution and/or their interpretation of the situation and their identity

o The information the decision-makers access and use o The complexity of the problem

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o The context of the decision (for example whether or not the decision-making unit views the decision as a communications decision or not) o The decision rules (formal or informal) which are used and which seem to

suit the situation; and o Chance.

While there are likely to be multiple potential processes, it may be possible to develop a number of prototypical approaches, as noted by Bunn (1994). This could be possible if a particular situation (such as arts sponsorship) was examined.

Therefore in developing theory associated with arts sponsorship decisions, the potential stages in decision-making should be noted. The process may be as simple as recognising a need, evaluating possibilities and making a choice, or it may be an expanded process.

It may also be illogical, circular or haphazard. For CCI and arts sponsorship,

examination of decision-making processes might lead to a series of questions as follows:

o Is there a range of decision-making processes for companies considering arts sponsorship? If so, what are the variations?

o Individuals, information, problem complexity, decision context, decision-rules and chance have been identified as key influences on and characteristics of the process; to what extent and in what manner do these hold influence, and are there other influences which are important in the context of arts sponsorship?

As seen above, the process is a part of the puzzle, but there are also elements which influence and characterise the process. Further attention is now directed to these elements.